Reexamining the impact of closing call auction on market quality: A natural experiment from the Shanghai stock exchange

Han, Qian, Zhao, Chengzhi, Chen, Jing ORCID: https://orcid.org/0000-0001-7135-2116 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 , 101821. 10.1016/j.pacfin.2022.101821

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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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Mathematics
Publisher:	Elsevier
ISSN:	0927-538X
Date of First Compliant Deposit:	22 July 2022
Date of Acceptance:	14 July 2022
Last Modified:	09 Nov 2024 02:30
URI:	https://orca.cardiff.ac.uk/id/eprint/151359

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