Journal article
The effect of circuit breakers on expected volatility: Tests using implied volatilities
Atlantic economic journal, Vol.25(2), pp.117-127
06/01/1997
DOI: 10.1007/BF02298379
Abstract
Following the 1987 stock market crash, trading controls or circuit breakers were implemented in financial markets to moderate extreme volatility. However, the effectiveness of circuit breakers on the operation of these markets is disputed. While some argue that circuit breakers curb the effects of overreaction in markets and restore confidence, others argue that these trading interruptions merely delay price movements to later periods or to other markets. This paper examines the effect of changes in circuit breaker rules on the market's expectation of future volatility. The results have policy implications and suggest that the circuit breaker rule changes have no effect on expected volatility.
Details
- Title: Subtitle
- The effect of circuit breakers on expected volatility: Tests using implied volatilities
- Creators
- Lucy F. Ackert - Berry CollegeJonathan Hao - Federal Reserve Bank of ChicagoWilliam C. Hunter - Federal Reserve Bank of Chicago
- Resource Type
- Journal article
- Publication Details
- Atlantic economic journal, Vol.25(2), pp.117-127
- DOI
- 10.1007/BF02298379
- ISSN
- 0197-4254
- eISSN
- 1573-9678
- Number of pages
- 11
- Language
- English
- Date published
- 06/01/1997
- Academic Unit
- Finance
- Record Identifier
- 9984963045402771
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