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The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension

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  • Camilleri, Silvio John

Abstract

The purpose of this paper is to investigate the volatility impacts of the suspension of a call auction system by the National Stock Exchange of India (NSE) in June 1999, thus extending prior empirical work relating to this area. The realised volatility on NSE is compared with that of the Bombay Stock Exchange using two volatility proxies: modulus of log returns and scaled intra-day price difference. We also focus on conditional volatility by estimating an AGARCH model on seasonally-adjusted NSE Nifty Index data. Whilst some results yield contrasting inferences, the overall outcomes indicate that volatility was higher during the auction period, and we do not find any evidence that supports the foreseen benefits of auction frameworks. Results reinforce the idea that market designers should think about the possible interactions with subsidiary market microstructure features when formulating auction protocols, since the latter may compromise auction efficacy.

Suggested Citation

  • Camilleri, Silvio John, 2015. "The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension," MPRA Paper 63240, University Library of Munich, Germany, revised 2015.
    • Handle: RePEc:pra:mprapa:63240
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    More about this item

    Keywords

    Call Auctions; National Stock Exchange of India; Seasonality; Stock Markets; Volatility;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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