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Can stock trading suspension calm down investors during market crises?

Author

Listed:
  • Chen, Weihua
  • Huang, Jennifer
  • Shi, Donghui
  • Song, Zhongzhi

Abstract

We examine the trading behavior of investors facing a large number of firm-initiated stock trading suspension events during the Chinese stock market crisis in July 2015. Using account-level trading data from the Shanghai Stock Exchange, we find that investors with a higher fraction of holding value in suspension sell less (or purchase more) of non-suspended stocks. Consequently, non-suspended stocks whose shareholders have a high average account-level suspension fraction experience a short-term relative price appreciation. This evidence indicates that trading suspension can calm down investors and therefore help to stabilize the volatile market during crises.

Suggested Citation

  • Chen, Weihua & Huang, Jennifer & Shi, Donghui & Song, Zhongzhi, 2024. "Can stock trading suspension calm down investors during market crises?," Journal of Financial Markets, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finmar:v:71:y:2024:i:c:s1386418124000521
    DOI: 10.1016/j.finmar.2024.100934
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    More about this item

    Keywords

    Stock trading suspension; Market crisis; Event study;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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