Frequent Batch Auctions vs. Continuous Trading: Evidence from Taiwan

47 Pages Posted: 29 Jan 2021 Last revised: 1 Mar 2021

See all articles by Roberto Riccò

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 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

Suggested Citation

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

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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