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Continuous Trading or Call Auctions: Revealed Preferences of Investors at the Tel Aviv Stock Exchange

Author

Listed:
  • Avner Kalay

    (Tel Aviv University and University of Utah,)

  • Li Wei

    (Iowa State University)

  • Avi Wohl

    (Tel Aviv University,)

Abstract

We use the move of Israeli stocks from call auction trading to continuous trading to show that investors have a preference for stocks that trade continuously. When large stocks move from call auction to continuous trading, the small stocks that still trade by call auction experience a significant loss in volume relative to the overall market volume. As small stocks move to continuous trading, they experience an increase in volume and positive abnormal returns because of the associated increase in liquidity. Overall, though, a move to continuous trading increases the volume of large stocks relative to small stocks. Copyright The American Finance Association 2002.

Suggested Citation

  • Avner Kalay & Li Wei & Avi Wohl, 2002. "Continuous Trading or Call Auctions: Revealed Preferences of Investors at the Tel Aviv Stock Exchange," Journal of Finance, American Finance Association, vol. 57(1), pages 523-542, February.
  • Handle: RePEc:bla:jfinan:v:57:y:2002:i:1:p:523-542
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    Citations

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    Cited by:

    1. Cissé, Abdoul Karim & Fontaine, Patrice, 2016. "Why do companies transfer the trading compartment of their common stocks," Research in International Business and Finance, Elsevier, vol. 36(C), pages 624-640.
    2. Silvio John Camilleri & Christopher J. Green, 2009. "The impact of the suspension of opening and closing call auctions: evidence from the National Stock Exchange of India," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 1(3), pages 257-284.
    3. Kliger, Doron & Levit, Boris, 2009. "Evaluation periods and asset prices: Myopic loss aversion at the financial marketplace," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 361-371, August.
    4. Theissen, Erik & Westheide, Christian, 2017. "Call of duty: Designated market maker participation in call auctions," CFR Working Papers 16-05, University of Cologne, Centre for Financial Research (CFR).
    5. OUATTARA, Aboudou, 2016. "Impact of the transition to continous trading on emerging financial market's liquidity : Case study of the West Africa Regional Exchange Market (BRVM)," MPRA Paper 75391, University Library of Munich, Germany.
    6. Weiyu Kuo & Yu‐Ching Li, 2011. "Trading Mechanisms and Market Quality: Call Markets versus Continuous Auction Markets," International Review of Finance, International Review of Finance Ltd., vol. 11(4), pages 417-444, December.
    7. Thierry Foucault, 2006. "Liquidité, coût du capital et organisation de la négociation des valeurs boursières," Revue d'Économie Financière, Programme National Persée, vol. 82(1), pages 123-138.
    8. Anand, Amber & Chakravarty, Sugato & Chuwonganant, Chairat, 2009. "Cleaning house: Stock reassignments on the NYSE," Journal of Financial Markets, Elsevier, vol. 12(4), pages 727-753, November.
    9. Eldor, Rafi & Hauser, Shmuel & Pilo, Batia & Shurki, Itzik, 2006. "The contribution of market makers to liquidity and efficiency of options trading in electronic markets," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 2025-2040, July.
    10. Henke, Harald, 2006. "When continuous trading becomes continuous: The impact of institutional trading on the continuous trading system of the Warsaw Stock Exchange," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(1), pages 110-132, February.
    11. Shmuel Hauser & Haim Kedar-Levy & Batia Pilo & Itzhak Shurki, 2006. "The Effect of Trading Halts on the Speed of Price Discovery," Journal of Financial Services Research, Springer;Western Finance Association, vol. 29(1), pages 83-99, February.
    12. Kalay, Avner & Sade, Orly & Wohl, Avi, 2004. "Measuring stock illiquidity: An investigation of the demand and supply schedules at the TASE," Journal of Financial Economics, Elsevier, vol. 74(3), pages 461-486, December.
    13. Fricke, Daniel & Gerig, Austin, 2014. "Liquidity Risk, Speculative Trade, and the Optimal Latency of Financial Markets," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100402, Verein für Socialpolitik / German Economic Association.
    14. Thierry Foucault, 2006. "Liquidity, cost of capital and the organization of trading in stock markets," Revue d'Économie Financière, Programme National Persée, vol. 82(1), pages 113-123.
    15. Choi, Hyunyoung & Finnerty, Joseph, 2006. "Impact study on the interest rate futures market," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(4), pages 495-512, September.

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