Arbeitspapier

Managing excess volatility: Design and effectiveness of circuit breakers

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We investigate different designs of circuit breakers implemented on European trading venues and examine their effectiveness to manage excess volatility and to preserve liquidity. Specifically, we empirically analyze volatility and liquidity around volatility interruptions implemented on the German and Spanish stock market which differ regarding specific design parameters. We find that volatility interruptions in general significantly decrease volatility in the post interruption phase. Unfortunately, this decrease in volatility comes at the cost of decreased liquidity. Regarding design parameters, we find tighter price ranges and shorter durations to support volatility interruptions in achieving their goals.

Language: Englisch

Bibliographic citation: Series: SAFE Working Paper ; No. 195

Classification: Wirtschaft
Information and Market Efficiency; Event Studies; Insider Trading
International Financial Markets
General Financial Markets: Government Policy and Regulation
Financial Institutions and Services: Government Policy and Regulation

Subject: Circuit Breaker
Volatility Interruption
Volatility
Liquidity
Market Design

Event: Geistige Schöpfung

(who): Clapham, Benjamin
Gomber, Peter
Haferkorn, Martin
Panz, Sven

Event: Veröffentlichung

(who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe

(where): Frankfurt a. M.

(when): 2017

DOI: doi:10.2139/ssrn.2910977

Handle: http://hdl.handle.net/10419/174902

URN: urn:nbn:de:hebis:30:3-456406

Last update: 10.03.2025, 11:42 AM CET

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Object type

Arbeitspapier

Associated

Clapham, Benjamin
Gomber, Peter
Haferkorn, Martin
Panz, Sven
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe

Time of origin

2017

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