Call auction transparency and market liquidity: Evidence from China

Gerace, Dionigi, Liu, Qigui, Tian, Gary Gang and Zheng, Willa 2015, Call auction transparency and market liquidity: Evidence from China, International review of finance, vol. 15, no. 2, pp. 223-255, doi: 10.1111/irfi.12047.

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Title Call auction transparency and market liquidity: Evidence from China
Author(s) Gerace, Dionigi
Liu, Qigui
Tian, Gary Gang
Zheng, Willa
Journal name International review of finance
Volume number 15
Issue number 2
Start page 223
End page 255
Total pages 33
Publisher Wiley Online Library
Place of publication Oxford, Eng.
Publication date 2015
ISSN 1369-412X
Summary This paper uses the natural experiment offered by the Shanghai Stock Exchange to investigate the impact of opening call auction transparency on market liquidity. We find that the dissemination of indicative trade information during the pre-open call auction session leads to an overall improvement in stock liquidity in the continuous trading session. Bid-ask spreads narrow in the first trading hour because adverse selection risk fell significantly and there is less price volatility in the continuous market. This effect is greater for actively traded securities than illiquid securities. Our findings are robust for different lengths of sample period, different lengths of trading hours after market open, and stocks that had (and had not) reformed the share split structure during our research period.
Language eng
DOI 10.1111/irfi.12047
Field of Research 150201 Finance
Socio Economic Objective 900101 Finance Services
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, Wiley Online Library
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Document type: Journal Article
Collection: Department of Finance
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