Who Trades at the Close? Implications for Price Discovery and Liquidity

70 Pages Posted: 25 Nov 2019 Last revised: 15 May 2023

See all articles by Vincent Bogousslavsky

Vincent Bogousslavsky

Boston College - Department of Finance

Dmitriy Muravyev

Michigan State University - Department of Finance; Canadian Derivatives Institute

Date Written: May 8, 2023

Abstract

Closing auctions set daily closing prices for U.S. stocks and account for a striking 7.5% of daily volume in 2018, up from 3.1% in 2010. We study closing auctions in the new regime of record volume. Closing auctions appear to match volumes at low cost: closing prices typically match pre-close bid or ask prices, and price impact is lower than during continuous trading. Auction price deviations revert quickly and almost completely on average. Auction-to-intraday volume spikes on S&P 500 additions and increases permanently afterwards, suggesting that closing volume is fueled directly and indirectly by the growth of indexing and ETFs.

Keywords: Closing auction, passive investing, price pressure, liquidity

JEL Classification: G11, G12, G14

Suggested Citation

Bogousslavsky, Vincent and Muravyev, Dmitriy, Who Trades at the Close? Implications for Price Discovery and Liquidity (May 8, 2023). Available at SSRN: https://ssrn.com/abstract=3485840 or http://dx.doi.org/10.2139/ssrn.3485840

Vincent Bogousslavsky

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Dmitriy Muravyev (Contact Author)

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

Canadian Derivatives Institute ( email )

3000, chemin de la Côte-Sainte-Catherine
Montréal, Québec H3T 2A7
Canada

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