The paper examines empirically the impact of price limits and trading halts on stock market volatility. Circuit breakers are regulatory instruments aiming to reduce severe price volatility and provide markets with a cooling off period. 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 prolong the price discovery process to subsequent periods. Applying serial correlation, structural stability tests and GARCH model on daily returns of different sector-wise indices of Nepal Stock Exchange from 2003 to 2011, the study investigates the impact of the regulatory instruments on conditional volatility estimation. The findings do not provide sufficient evidence to support information and overreaction hypotheses. However, the results reveal possibility of presence of gravitational effect. The stock market volatility has been found to increase slightly in the post-circuit breaker period. The results have policy implications and question the effectiveness of circuit breaker to limit stock market volatility.