Trading Behavior on Expiration Days and Quarter-End Days: The Effect of a New Closing Method
On July 1, 2002, the Taiwan Stock Exchange changed its closing price procedure to a five-minute call auction. This paper examines different types of trader behavior at the close before and after institution of the new mechanism. The results show that, since the new mechanism was introduced, individuals have shifted their trades away from the closing interval to the preclosing interval, which worsens market liquidity at the close. This paper also finds that institutional investors try to influence closing prices for window dressing at quarter ends, whereas foreign institutions attempt to influence closing prices on the expiration days of index futures. After the new mechanism's introduction, neither the expiration-day effect nor the quarter-end-day effect disappeared. Despite this finding, the new mechanism does make it more difficult and costly for traders to attempt to influence the stock price.
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): 46 (2010)
Issue (Month): 4 (January)
|Contact details of provider:|| Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024|
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.:
- Amihud, Yakov & Mendelson, Haim & Murgia, Maurizio, 1990. "Stock market microstructure and return volatility : Evidence from Italy," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 423-440, August.
- Mark M. Carhart & Ron Kaniel & David K. Musto & Adam V. Reed, 2002. "Leaning for the Tape: Evidence of Gaming Behavior in Equity Mutual Funds," Journal of Finance, American Finance Association, vol. 57(2), pages 661-693, 04.
- Jin-Shuei Luo & Chun-An Li, 2008. "Futures Market Sentiment and Institutional Investor Behavior in the Spot Market: The Emerging Market in Taiwan," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(2), pages 70-86, March.
- Cushing, David & Madhavan, Ananth, 2000. "Stock returns and trading at the close," Journal of Financial Markets, Elsevier, vol. 3(1), pages 45-67, February.
- David Michayluk & Gary C. Sanger, 2006. "Day-End Effect On The Paris Bourse," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(1), pages 131-146.
- Mei-Hsing Cheng & Hsin-Hong Kang, 2007. "Price-Formation Process of an Emerging Futures Market: Call Auction Versus Continuous Auction," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 43(1), pages 74-97, February.
- Yu Chuan Huang & Pei Lin Tsai, 2008. "Effectiveness of Closing Call Auctions: Evidence from the Taiwan Stock Exchange," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(3), pages 5-20, May.
- Rosita P. Chang & Shuh-Tzy Hsu & Nai-Kuan Huang & S. Ghon Rhee, 1999. "The Effects of Trading Methods on Volatility and Liquidity: Evidence from the Taiwan Stock Exchange," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(1-2), pages 137-170.
- Ananth N. Madhavan, .
"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.
- Hillion, Pierre & Suominen, Matti, 2004. "The manipulation of closing prices," Journal of Financial Markets, Elsevier, vol. 7(4), pages 351-375, October.
- Parkinson, Michael, 1980. "The Extreme Value Method for Estimating the Variance of the Rate of Return," The Journal of Business, University of Chicago Press, vol. 53(1), pages 61-65, January.
- Anchor Y. Lin & Lin-Shang Huang & Mei-Yuan Chen, 2007. "Price Comovement and Institutional Performance Following Large Market Movements," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 43(5), pages 37-61, October.
When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:46:y:2010:i:4:p:105-125. 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.