Frequent Batch Auctions vs. Continuous Trading: Evidence from Taiwan
47 Pages Posted: 29 Jan 2021 Last revised: 1 Mar 2021
Date Written: November 19, 2020
We exploit the shift from Frequent Batch Auctions to Continuous Trading at the Taiwan Stock Exchange to show that market quality and market efficiency decreased after the change. Following the implementation of Continuous Trading on March 23, 2020 we find higher spreads and trading volume. Variance ratios, return autocorrelations, pricing error and cross-sectional predictability of intraday returns indicate that market efficiency decreased after the shift to continuous trading while we don’t find any significant result for abnormal returns. Overall our results show that Frequent Batch Auctions were better than Continuous Trading for market efficiency and liquidity.
Keywords: Frequent Batch Auction, Continuous Trading, Limit Order Markets, Liquidity, Market Quality, Price Efficiency
JEL Classification: G12, G14, G15
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