STOCK-MARKET CRASHES AND THE PERFORMANCE OF CIRCUIT-BREAKERS - EMPIRICAL-EVIDENCE

This study examines the behavior of a small stock market with circuit breakers and with a one-hour preauction order imbalance disclosure, du ring the October 1987 crash. The crash and its aftershocks lasted for a week and selling pressure was concentrated in higher beta, larger ca pitalization, and lower leverage firm stocks. Circuit breakers when im plemented reduced the next-day opening order imbalance and the initial price loss; however, they had no effect on the long-run response. Som e price overreaction and reversal phenomena also are documented.