Closing Call Auctions and Liquidity

25 Pages Posted: 9 Apr 2003

See all articles by Michael J. Aitken

Michael J. Aitken

Macquarie Graduate School of Management

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2005

Abstract

This paper examines the impact of closing call auctions on liquidity. It exploits the natural experiment offered by the introduction of a closing call auction on the Australian Stock Exchange on 10 February, 1997. The introduction of the closing call auction is associated with a reduction in trading volume at the close of continuous trading. However, bid ask spreads during continuous trading are largely unaffected by the introduction of the closing call auction. Therefore, closing call auctions consolidate liquidity at a single point in time without having any adverse effect on the cost of trading.

Keywords: Closing call auctions, liquidity

JEL Classification: G10, G14

Suggested Citation

Aitken, Michael J. and Frino, Alex and Comerton-Forde, Carole, Closing Call Auctions and Liquidity (February 2005). Available at SSRN: https://ssrn.com/abstract=391564 or http://dx.doi.org/10.2139/ssrn.391564

Michael J. Aitken

Macquarie Graduate School of Management ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Carole Comerton-Forde (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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