Price discovery mechanisms based on fully computerized trading, non-existence of monopolist specialists and opening batch mechanisms, and restrictions on order cancellation during trading are some of the factors that accelerate the speed of adjustment in prices. Our results are robust to time-of-halt and duration-of-halt effects. Reaction of investors to bad news is slower and stronger than good news. It also investigates, for the first time, the trading behavior of different types of investors such as individuals, mutual funds and brokerage houses around trading halts.įindings show that most of the new information is absorbed by prices within fifteen minutes (almost completely in an hour) following the resume of trading after a halt. By considering these factors, this paper assesses the efficiency of trading halts by examining the return, volatility and volume behavior around news-initiated trading halts through the unique microstructure and trade-by-trade data of the Istanbul Stock Exchange (ISE). In this debate, it seems crucial to understand how the trading behavior of institutional and individual investors, the market microstructure and the duration of the halts are related to the effects of the trading halts. However, the effects and effectiveness of trading halts remain controversial among academics and regulators.
Firm-specific trading halts have become a common practice in many international stock markets during the last two decades.
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