Does the Pre-Open Auction Market Improve Efficiency of Price Discovery in Stock Markets? Evidence from India

Indian Journal of Finance, Volume 9, Issue 11, 2015

Posted: 14 Nov 2015

See all articles by Gagan Deep Sharma

Gagan Deep Sharma

Guru Gobind Singh Indraprastha (GGSIP) University

Mansi Gupta

Guru Gobind Singh Indraprastha (GGSIP) University

Date Written: November 30, 2015

Abstract

The paper analyzed the impact of opening call auction on the efficiency of price discovery at the National Stock Exchange (NSE), India by studying the returns and volatility behavior of one benchmark index (NSE's Nifty) and 10 Nifty component companies selected on random. The paper used the closing prices for the period 3 years before and 3 years after the introduction of the call auction market in 2010. Descriptive statistics, one-way ANOVA, augmented Dickey-Fuller unit-root Test, and ARCH-GARCH type methodology was employed for the analysis. The paper found no significant difference in the returns during the two periods, though a reduction in volatility was observed. The introduction of the pre-open auction market resulted in an improvement in the efficiency of price discovery of various stocks. The findings of the paper offer valuable inputs for stock market regulators as well as investors.

Keywords: efficiency of price discovery, pre-open call auction, one-way ANOVA, augmented Dickey-Fuller unit-root test, ARCH-GARCH

JEL Classification: G11, G14, N25

Suggested Citation

Sharma, Gagan Deep and Gupta, Mansi, Does the Pre-Open Auction Market Improve Efficiency of Price Discovery in Stock Markets? Evidence from India (November 30, 2015). Indian Journal of Finance, Volume 9, Issue 11, 2015, Available at SSRN: https://ssrn.com/abstract=2690803

Gagan Deep Sharma (Contact Author)

Guru Gobind Singh Indraprastha (GGSIP) University ( email )

Sector 16 C,
Dwarka
Delhi, Delhi 110078
India

Mansi Gupta

Guru Gobind Singh Indraprastha (GGSIP) University ( email )

Sector 16 C, Kashmere Gate
Dwarka
Delhi, DE 110006
India

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