Frequent Batch Auctions vs. Continuous Trading: Evidence from Taiwan

60 Pages Posted: 26 Oct 2023 Last revised: 26 Mar 2024

See all articles by Yi-Tsung Lee

Yi-Tsung Lee

Peking University - Guanghua School of Management

Roberto Riccò

Norwegian School of Economics (NHH) - Department of Finance

Kai Wang

Central University of Finance and Economics (CUFE)

Date Written: November 19, 2020

Abstract

We exploit the switch from frequent batch auctions to continuous trading at the Taiwan Stock
Exchange to show that liquidity did not change significantly, while efficiency improved substantially for mid-cap and small-cap after trading became continuous. We also find positive and significant abnormal returns for mid-cap and small-cap, whilst for large-cap abnormal returns are positive but insignificant. Continuous trading increased profits for fast investors and losses for individual investors in mid-cap and small-cap. The results inform the debate on optimal market design and support previous studies such as Amihud, Mendelson, and Lauterbach
(1997) suggesting that investors highly value trading continuously.

Keywords: Frequent batch auction, continuous trading, market quality, market efficiency, abnormal return, investor performance

JEL Classification: G12, G14, G15

Suggested Citation

Lee, Yi-Tsung and Riccò, Roberto and Wang, Kai, Frequent Batch Auctions vs. Continuous Trading: Evidence from Taiwan (November 19, 2020). Available at SSRN: https://ssrn.com/abstract=3733682 or http://dx.doi.org/10.2139/ssrn.3733682

Yi-Tsung Lee

Peking University - Guanghua School of Management ( email )

Office 336, Guanghua Building 2
Beijing, Beijing 100871
China
(86-10) 6275 5742 (Phone)
(86-10) 6275 5742 (Fax)

Roberto Riccò (Contact Author)

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

HOME PAGE: http://https://www.nhh.no/en/employees/faculty/roberto-ricco/

Kai Wang

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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