A Good Beginning Makes a Good Market: The Effect of Different Market Opening Structures on Market Quality.
This paper deals with the market structure at the opening of the trading day and its influence on subsequent trading. We compare a single continuous double auction and two complement markets with different call auction designs as opening mechanisms in a unified experimental framework. The call auctions differ with respect to their levels of transparency. We find that a call auction not only improves market efficiency and liquidity at the beginning of the trading day when compared to the stand-alone continuous double auction, but also causes positive spillover effects on subsequent trading. Concerning the design of the opening call auction, we find no significant differences between the transparent and nontransparent specification with respect to opening prices and liquidity. In the course of subsequent continuous trading, however, market quality is slightly higher after a nontransparent call auction.
Department of Statistics and Operations Research, Karl-Franzens University Graz, Universitatsstraße 15/E3, 8010 Graz, Austria.
Gernot
G
Hinterleitner
Department of Statistics and Operations Research, Karl-Franzens University Graz, Universitatsstraße 15/E3, 8010 Graz, Austria.
Ulrike
U
Leopold-Wildburger
Institute of Banking and Finance, Karl-Franzens University Graz, Universitatsstraße 15/F2, 8010 Graz, Austria ; Department of Banking and Insurance, University of Applied Sciences Joanneum, Eggenberger Allee 11, 8020 Graz, Austria.
Roland
R
Mestel
Institute of Banking and Finance, Karl-Franzens University Graz, Universitatsstraße 15/F2, 8010 Graz, Austria ; Department of Banking and Finance, University of Innsbruck, Universitatsstraße 15/4, 6020 Innsbruck, Austria.
Stefan
S
Palan