Effectiveness of Closing Call Auctions: Evidence from the Taiwan Stock Exchange
To reduce market volatility observed at the close of trading and to enhance the fairness of the closing price, the Taiwan Stock Exchange (TSE) changed the way it executed its closing transactions by instituting a five-minute closing call auction. This paper examines the effectiveness of this new mechanism for the TSE. The empirical results show that the closing call has effectively reduced market volatility at closing and enhanced market efficiency by reducing noise in stock closing prices. However, market liquidity has declined, primarily due to the actions of individual investors. Because the limit order book is fully opaque for the five-minute call period, investors may close their position earlier than the closing period to avoid additional risk. This implies that, to maximize the benefits of the closing call, the TSE should provide the transparency of the limit order book for the closing call period.
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.
Volume (Year): 44 (2008)
Issue (Month): 3 (May)
|Contact details of provider:|| Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024|
When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:44:y:2008:i:3:p:5-20. 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: (Chris Nguyen)The email address of this maintainer does not seem to be valid anymore. Please ask Chris Nguyen to update the entry or send us the correct address
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.