Circuit Breakers and Market Volatility¶
SUBRAHMANYAM, A. (1994). Circuit Breakers and Market Volatility: A Theoretical Perspective. The Journal of Finance, 49(1), 237-254.
Cited by¶
2 citations across 2 artifacts.
Each citation links to the sentence it supports in the citing article.
Mechanisms¶
- Circuit Breaker Pause
- A pause can even cause the rush it was meant to prevent, as actors race to get in before the gate drops — the magnet effect is a real and debated concern in market-microstructure research.
This sourceModels how an anticipated trading halt can pull trades forward and exacerbate the price movement it is meant to restrain.
- A pause can even cause the rush it was meant to prevent, as actors race to get in before the gate drops — the magnet effect is a real and debated concern in market-microstructure research.
- Feedback-Dampening Control
- It can backfire — a halt that signals danger can intensify the very panic it meant to calm, as forced sellers rush to trade before the next halt, so the control amplifies the loop it should damp
This sourceShows theoretically that anticipated trading halts can pull trades forward and thereby increase price variability and exacerbate price movements.
- It can backfire — a halt that signals danger can intensify the very panic it meant to calm, as forced sellers rush to trade before the next halt, so the control amplifies the loop it should damp
Verification¶
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Registry ID ref:c0547095cac2 · see in the full table