IDEAS home Printed from https://ideas.repec.org/a/ibf/ijbfre/v7y2013i2p17-26.html
   My bibliography  Save this article

Pre-close Transparency and Price Efficiency at Market Closing: Evidence from the Taiwan Stock Exchange

Author

Listed:
  • Cheng-Yi Chien

Abstract

This paper examines the impact of increased pre-close transparency on the effectiveness of stock closing call. On January 1, 2003, the Taiwan Stock Exchange increases pre-close transparency by disclosing the best five bid and ask prices and related unexecuted orders before market closing. At the same time, the Taiwan Stock Exchange does not disseminate any information about the limit-order book during the five-minute closing call period. This institutional change presents an opportunity to analyze how an increase in pre-close transparency affects informed trading and price efficiency near market closing. Empirical results show that an increase in pre-close transparency enhances the price efficiency of stock closing call, implying that informed traders will increase their trading during stock closing call following pre-close transparency increases.

Suggested Citation

  • Cheng-Yi Chien, 2013. "Pre-close Transparency and Price Efficiency at Market Closing: Evidence from the Taiwan Stock Exchange," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 7(2), pages 17-26.
  • Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:17-26
    as

    Download full text from publisher

    File URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Madhavan, Ananth, 1996. "Security Prices and Market Transparency," Journal of Financial Intermediation, Elsevier, vol. 5(3), pages 255-283, July.
    2. Xin Zhao & Kee H. Chung, 2006. "Decimal Pricing and Information-Based Trading: Tick Size and Informational Efficiency of Asset Price," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(5-6), pages 753-766.
    3. Chung, Kee H. & Chuwonganant, Chairat, 2009. "Transparency and market quality: Evidence from SuperMontage," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 93-111, January.
    4. Hillion, Pierre & Suominen, Matti, 2004. "The manipulation of closing prices," Journal of Financial Markets, Elsevier, vol. 7(4), pages 351-375, October.
    5. Ekkehart Boehmer & Gideon Saar & Lei Yu, 2005. "Lifting the Veil: An Analysis of Pre‐trade Transparency at the NYSE," Journal of Finance, American Finance Association, vol. 60(2), pages 783-815, April.
    6. Xin Zhao & Kee H. Chung, 2006. "Decimal Pricing and Information‐Based Trading: Tick Size and Informational Efficiency of Asset Price," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(5‐6), pages 753-766, June.
    7. Terrence Hendershott & Charles M. Jones, 2005. "Island Goes Dark: Transparency, Fragmentation, and Regulation," Review of Financial Studies, Society for Financial Studies, vol. 18(3), pages 743-793.
    8. Chowdhry, Bhagwan & Nanda, Vikram, 1991. "Multimarket Trading and Market Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 483-511.
    9. Shmuel Baruch, 2005. "Who Benefits from an Open Limit-Order Book?," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1267-1306, July.
    10. Comerton-Forde, Carole & Ting Lau, Sie & McInish, Thomas, 2007. "Opening and closing behavior following the introduction of call auctions in Singapore," Pacific-Basin Finance Journal, Elsevier, vol. 15(1), pages 18-35, January.
    11. Yu Chuan Huang & Pei Lin Tsai, 2008. "Effectiveness of Closing Call Auctions: Evidence from the Taiwan Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(3), pages 5-20, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pham, Thu Phuong & Westerholm, P. Joakim, 2013. "A survey of research into broker identity and limit order book," Working Papers 17212, University of Tasmania, Tasmanian School of Business and Economics, revised 16 Oct 2013.
    2. Paulo Pereira da Silva & Carlos Vieira & Isabel Vieira, 2018. "Central clearing and CDS market quality," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(6), pages 731-753, June.
    3. He, Yinghua & Nielsson, Ulf & Guo, Hong & Yang, Jiong, 2014. "Subscribing to transparency," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 189-206.
    4. Chan, Shu Hui & Huang, Yu Chuan & Lin, Sheng-Min, 2020. "Market transparency and closing price behavior on month-end days: Evidence from Taiwan," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    5. Eom, Kyong Shik & Ok, Jinho & Park, Jong-Ho, 2007. "Pre-trade transparency and market quality," Journal of Financial Markets, Elsevier, vol. 10(4), pages 319-341, November.
    6. Degryse, H.A., 2007. "Competition on financial markets : Does market design matter?," Other publications TiSEM ee5530b2-34f7-4d95-ad62-f, Tilburg University, School of Economics and Management.
    7. Comerton-Forde, Carole & Putniņš, Tālis J., 2015. "Dark trading and price discovery," Journal of Financial Economics, Elsevier, vol. 118(1), pages 70-92.
    8. Gomber, Peter & Jäger, Benedikt, 2014. "MiFID: Eine systematische Analyse der Zielerreichung," SAFE White Paper Series 14, Leibniz Institute for Financial Research SAFE.
    9. Tseng, Yi-Heng & Chen, Shu-Heng, 2015. "Limit order book transparency and order aggressiveness at the closing call: Lessons from the TWSE 2012 new information disclosure mechanism," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 241-272.
    10. Ariadna Dumitrescu, 2010. "Liquidity and Optimal Market Transparency," European Financial Management, European Financial Management Association, vol. 16(4), pages 599-623, September.
    11. Johannes A. Skjeltorp & Elvira Sojli & Wing Wah Tham, 2011. "Sunshine trading: Flashes of trading intent at the NASDAQ," Working Paper 2011/17, Norges Bank.
    12. Phuong Pham, Thu & Joakim Westerholm, P., 2013. "An international trend in market design: Endogenous effects of limit order book transparency on volatility, spreads, depth and volume," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 202-223.
    13. Aghanya, Daniel & Agarwal, Vineet & Poshakwale, Sunil, 2020. "Market in Financial Instruments Directive (MiFID), stock price informativeness and liquidity," Journal of Banking & Finance, Elsevier, vol. 113(C).
    14. Jiayi Li & Sumei Luo & Guangyou Zhou, 2021. "Call auction, continuous trading and closing price formation," Quantitative Finance, Taylor & Francis Journals, vol. 21(6), pages 1037-1065, June.
    15. Dirk Schiereck & Christian Voigt, 2010. "With or without you: market quality of floor trading when screen trading closes early," Review of Quantitative Finance and Accounting, Springer, vol. 34(2), pages 179-197, February.
    16. Peter Gomber & Satchit Sagade & Erik Theissen & Moritz Christian Weber & Christian Westheide, 2017. "Competition Between Equity Markets: A Review Of The Consolidation Versus Fragmentation Debate," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 792-814, July.
    17. Yu Chuan Huang & Shu Hui Chan, 2014. "The Trading Behavior of Attention Securities with Different Closing Mechanisms: Evidence from Taiwan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 17(04), pages 1-16.
    18. Wang, Ming-Chang & Cheng, Lee-Young & Ko, Chien-Chuan & Chou, Pang-Ying, 2018. "Does public latency influence market quality? An analysis of pre-trade transparency at the Taiwan futures exchange," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 227-240.
    19. Hsiu‐Chuan Lee & Cheng‐Yi Chien & Tzu‐Hsiang Liao, 2009. "Determination of stock closing prices and hedging performance with stock indices futures," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(4), pages 827-847, December.
    20. George F. Tannous & Ying Zhang, 2008. "Cross‐listing and Trading on the Domestic Market: Evidence from Canada–US Partial Holidays," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(9‐10), pages 1245-1275, November.

    More about this item

    Keywords

    Transparency; Closing Call; Price Efficiency; Taiwan Stock Exchange;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:17-26. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mercedes Jalbert (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.