Market stability analysis after the circuit breaker for the CSI 300 energy index

In order to deal with the herd effect and the risk contagions in the stock market, China officially took the circuit breaker mechanism for the CSI 300 index on the first trading day in 2016. However, this mechanism was abolished just in 4 days. Therefore, this paper attempts to empirically investigate the circuit breaker mechanism and the CSI 300 energy index based on the regression discontinuity design method. The empirical results show the energy index is more volatile after the discontinuity compared with which before it, indicating that the circuit breaker mechanism has not achieved the expected effect in China's energy industry. The ineffectiveness of this mechanism is proved in the CSI 300 energy index, which also happens to the CSI 300 index. Therefore, the CSI 300 energy index can be considered as a pilot to examine the improved circuit breaker mechanism in the future.