BEGIN:VCALENDAR
VERSION:2.0
PRODID:-//Talks.cam//talks.cam.ac.uk//
X-WR-CALNAME:Talks.cam
BEGIN:VEVENT
SUMMARY:The Dark Side of Circuit Breakers - Cambridge Finance Workshop - H
 ui Chen (MIT) 
DTSTART:20180531T120000Z
DTEND:20180531T130000Z
UID:TALK72762@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:Market-wide trading halts\, also called circuit breakers\, hav
 e been proposed and widely adopted as a measure to stabilize the stock mar
 ket when experiencing large price movements.  We develop an intertemporal 
 equilibrium model to examine how circuit breakers impact the market when i
 nvestors trade to share risk.  We show that a downside circuit breaker ten
 ds to lower the stock price and increase its volatility\, both conditional
  and realized.  Due to this increase in volatility\, the circuit breaker's
  own presence actually raises the likelihood of reaching the triggering pr
 ice.  In addition\, the circuit breaker also increases the probability of 
 hitting the triggering price as the stock price approaches it - the so-cal
 led ``magnet effect.''  Surprisingly\, the volatility amplification effect
  becomes stronger when the wealth share of the relatively pessimistic agen
 t is small.
LOCATION:Room W4.03 Judge Business School
END:VEVENT
END:VCALENDAR