Frequent Batch Auctions vs. Continuous Trading: Evidence from Taiwan
60 Pages Posted: 26 Oct 2023 Last revised: 26 Mar 2024
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: Suggested Citation