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A Bias in Closing Prices: The Case of the When-Issued Pricing Anomaly


  • Brooks, Raymond M.
  • Chiou, Shur-Nuaan


Financial studies examining stock price behavior have principally relied on end-of-day data. This paper illustrates a bias in closing prices by reexamining the when-issue pricing anomaly with intraday data. With intraday data, major portions of the pricing anomaly can be explained by: a nonsynchronous matching of trades; a difference in the settlement procedures (labeled time value of money in Choi and Strong (1983)); a mismatching of market purchases with market sales (first proposed by Lamoureux and Wansley (1989)); and a higher frequency of market purchases relative to market sales. In addition, the small remaining portion of the anomaly cannot be arbitraged. The remaining premium is attributed to a lower level of limit order competition and an order imbalance in the when-issued shares.

Suggested Citation

  • Brooks, Raymond M. & Chiou, Shur-Nuaan, 1995. "A Bias in Closing Prices: The Case of the When-Issued Pricing Anomaly," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(03), pages 441-454, September.
  • Handle: RePEc:cup:jfinqa:v:30:y:1995:i:03:p:441-454_00

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    Cited by:

    1. Luc Renneboog & Christophe Spaenjers, 2011. "The Dutch Grey Market," De Economist, Springer, vol. 159(1), pages 25-40, March.
    2. Robert E.J. Hibbard & Rob Brown & Keith R. McLaren, 2002. "Nonsimultaneity and Futures Option Pricing: Simulation and Empirical Evidence," Monash Econometrics and Business Statistics Working Papers 13/02, Monash University, Department of Econometrics and Business Statistics.
    3. Brooks, Raymond M. & Kim, Hongshik, 1997. "The individual investor and the weekend effect: A reexamination with intraday data," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(3), pages 725-737.
    4. John R. Ezzell & James A. Miles & J. Harold Mulherin, 2001. "Is there Really a When-Issued Premium?," Claremont Colleges Working Papers 2001-34, Claremont Colleges.
    5. Bildik, Recep, 2001. "Intra-day seasonalities on stock returns: evidence from the Turkish Stock Market," Emerging Markets Review, Elsevier, vol. 2(4), pages 387-417, December.

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