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    Reexamining the impact of closing call auction on market quality: a natural experiment from the Shanghai Stock Exchange

    Han, Q. and Zhao, C. and Chen, J. and Guo, Qian (2022) Reexamining the impact of closing call auction on market quality: a natural experiment from the Shanghai Stock Exchange. Pacific Basin Finance Journal 74 , p. 101821. ISSN 0927-538X.

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    Official URL: https://doi.org/10.1016/j.pacfin.2022.101821

    Abstract

    Using the intraday and daily data of Chinese A shares in Shanghai and Shenzhen from May to January 2018, this paper examines the regulatory impact of the Shanghai closing call auction on market liquidity, volatility, and price effectiveness using the Difference-in-Difference (DID) method. We find that the Shanghai closing call auction has no significant impact on market liquidity, but has resulted in 1) a shift of trading volume from closing to pre-closing; 2) increased volatility at pre-closing; 3) significant improvement in the continuity of the closing price; and 4) no prominent improvement on price effectiveness. Also, the regime appears to have a pronounced impact, particularly on small-cap stocks. Our findings suggest that the introduction of the Shanghai closing call auction helps reduce the risk of small-cap stocks, meanwhile improve the continuity of closing and pre-closing prices.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Closing Call Auction, Market Liquidity, Market Volatility, Closing Price Manipulation
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Christine Guo
    Date Deposited: 26 Jul 2022 09:30
    Last Modified: 02 Aug 2023 18:17
    URI: https://eprints.bbk.ac.uk/id/eprint/48808

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