A Good Beginning Makes a Good Market: The Effect of Different Market Opening Structures on Market Quality
AbstractThis paper deals with the market structure at the opening of the trading day and its influence on subsequent trading. We compare a single continuous double auction and two complement markets with different call auction designs as opening mechanisms in a unified experimental framework. The call auctions differ with respect to their levels of transparency. We find that a call auction not only improves market quality at the beginning of the trading day when com-pared to the stand-alone continuous double auction, but also causes positive spillover effects on subsequent trading. Concerning the design of the opening call auction, we find no signifi-cant differences between the transparent and nontransparent specification with respect to opening prices and liquidity. In the course of subsequent continuous trading, however, market quality is slightly higher after a nontransparent call auction.
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Bibliographic InfoPaper provided by Faculty of Social and Economic Sciences, Karl-Franzens-University Graz in its series Working Paper Series, Social and Economic Sciences with number 2012-01.
Length: 27 pages
Date of creation: 25 May 2012
Date of revision:
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Postal: Universitaetsstrasse 15/AE, 8010 Graz
Web page: http://sowi.uni-graz.at/de/forschen/working-paper-series/
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Call auction; continuous double auction; transparency; market quality;
Find related papers by JEL classification:
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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