Intraday information efficiency on the Chinese equity market
Bid-ask spread is a direct measure of information asymmetry. As such, it can be used to evaluate information efficiency. In this paper, we show that both the quoted and effective spreads on the Shanghai Stock Exchange are extremely high at the open, decrease over the trading day, and experience a small rebound at the close. The spread decreases with share volume, daily trades, and market capitalization, but increases with average trade size. We further examine the beta using the unbiasedness regression from Biais et al. [Biais, B., Hillion, P., Spatt, C. (1999). Price discovery and learning during the pre-opening period in the Paris Bourse. Journal of Political Economy, 107, 1218-1248] and find that intraday prices are efficient and unbiased for more liquid stocks. This suggests that liquidity prompts information-motivated trading, which, in turn, improves information dissemination. Moreover, our findings indicate that small and medium trades are more likely to facilitate the formation of efficient prices at the open and close of the market, while large trades play a more important role during the other trading periods.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chung, Kee H. & Van Ness, Bonnie F. & Van Ness, Robert A., 1999. "Limit orders and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 53(2), pages 255-287, August.
- Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
- Wurgler, Jeffrey, 2000.
"Financial markets and the allocation of capital,"
Journal of Financial Economics,
Elsevier, vol. 58(1-2), pages 187-214.
- Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers ysm123, Yale School of Management, revised 01 Mar 2001.
- Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
- Michael J. Barclay & Terrence Hendershott, 2004. "Liquidity Externalities and Adverse Selection: Evidence from Trading after Hours," Journal of Finance, American Finance Association, vol. 59(2), pages 681-710, 04.
- Charles Cao & Eric Ghysels & Frank Hatheway, 2000. "Price Discovery without Trading: Evidence from the Nasdaq Preopening," Journal of Finance, American Finance Association, vol. 55(3), pages 1339-1365, 06.
- Chen, Tao & Li, Jie & Cai, Jun, 2008. "Information content of inter-trade time on the Chinese market," Emerging Markets Review, Elsevier, vol. 9(3), pages 174-193, September.
- Brock, William A. & Kleidon, Allan W., 1992. "Periodic market closure and trading volume : A model of intraday bids and asks," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 451-489.
- Ellul, Andrew & Shin, Hyun Song & Tonks, Ian, 2005. "Opening and Closing the Market: Evidence from the London Stock Exchange," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(04), pages 779-801, December.
- Andrew Ellul & Hyun Song Shin & Ian Tonks, 2004. "Opening and closing the market: evidence from the London Stock Exchange," LSE Research Online Documents on Economics 24753, London School of Economics and Political Science, LSE Library.
- Hyun Song Shin & Ian Tonks & Andrew Ellul, 2004. "Opening and Closing the Market: Evidence from the London Stock Exchange," FMG Discussion Papers dp506, Financial Markets Group.
- Avanidhar Subrahmanyam, 2001. "Feedback from Stock Prices to Cash Flows," Journal of Finance, American Finance Association, vol. 56(6), pages 2389-2413, December.
- Ciccotello, Conrad S. & Hatheway, Frank M., 2000. "Indicating Ahead: Best Execution and the NASDAQ Preopening," Journal of Financial Intermediation, Elsevier, vol. 9(2), pages 184-212, April.
- Foster, F. Douglas & Viswanathan, S., 1994. "Strategic Trading with Asymmetrically Informed Traders and Long-Lived Information," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(04), pages 499-518, December.
- Barclay, Michael J. & Hendershott, Terrence, 2008. "A comparison of trading and non-trading mechanisms for price discovery," Journal of Empirical Finance, Elsevier, vol. 15(5), pages 839-849, December.
- Michael J. Barclay, 2003. "Price Discovery and Trading After Hours," Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1041-1073.
- Madhavan, Ananth, 1992. " Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 607-641, June.
- Ananth N. Madhavan, "undated". "Trading Mechanisms in Securities Markets," Rodney L. White Center for Financial Research Working Papers 16-90, Wharton School Rodney L. White Center for Financial Research.
- Davies, Ryan J., 2003. "The Toronto Stock Exchange preopening session," Journal of Financial Markets, Elsevier, vol. 6(4), pages 491-516, August.
- Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-658.
- Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
- Comerton-Forde, Carole & Rydge, James, 2006. "The influence of call auction algorithm rules on market efficiency," Journal of Financial Markets, Elsevier, vol. 9(2), pages 199-222, May.
- Bruno Biais & Pierre Hillion & Chester Spatt, 1999. "Price Discovery and Learning during the Preopening Period in the Paris Bourse," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1218-1248, December.
- Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-746, June.
- Chan, K C & Christie, William G & Schultz, Paul H, 1995. "Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities," The Journal of Business, University of Chicago Press, vol. 68(1), pages 35-60, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:20:y:2009:i:3:p:527-541. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.