Closing call auctions and liquidity |
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| Authors: | Michael Aitken Carole Comerton-Forde Alex Frino |
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| Affiliation: | School of Banking and Finance, University of New South Wales and Capital Markets Cooperative Research Centre, Sydney, 2052, Australia;;Finance Discipline, School of Business, University of Sydney, Sydney, 2006, Australia |
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| Abstract: | The present paper examines the impact of closing call auctions on liquidity. It exploits the natural experiment offered by the introduction of a closing call auction on the Australian Stock Exchange on 10 February 1997. The introduction of the closing call auction is associated with a reduction in trading volume at the close of continuous trading. However, bid‐ask spreads during continuous trading are largely unaffected by the introduction of the closing call auction. Therefore, closing call auctions consolidate liquidity at a single point in time without having any adverse effect on the cost of trading. |
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| Keywords: | Call auctions Liquidity Market microstructure |
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