A Good Beginning Makes a Good Market: The Effect of Different Market Opening Structures on Market Quality
This paper deals with the market structure at the opening of the trading day and its influence on subsequent trading. We compare a single continuous double auction and two complement markets with different call auction designs as opening mechanisms in a unified experimental framework. The call auctions differ with respect to their levels of transparency. We find that a call auction not only improves market quality at the beginning of the trading day when com-pared to the stand-alone continuous double auction, but also causes positive spillover effects on subsequent trading. Concerning the design of the opening call auction, we find no signifi-cant differences between the transparent and nontransparent specification with respect to opening prices and liquidity. In the course of subsequent continuous trading, however, market quality is slightly higher after a nontransparent call auction.
|Date of creation:||25 May 2012|
|Date of revision:|
|Publication status:||Published as Hinterleitner, G., Leopold-Wildburger, U., Mestel, R., Palan, S., “A Good Beginning Makes a Good Market: The Effect of Different Market Opening Structures on Market Quality”, Scientific World Journal, Article ID 307808, 2014, 1-14.|
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