Price Impact: Continuous Trading, Closing Auctions, and Opening Auctions

Abstract

The closing auction has experienced significant growth over the last decade, and it has become increasingly significant for traders. We find that the price impact of closing auctions in the US is significantly smaller than that in continuous markets. Opening auctions are typically less active and less liquid. The price impact is significantly correlated with stock characteristics such as exchange, price, and volatility in all three trading avenues. We also examine the trading costs of several common trading strategies. We find that the trading costs in closing auctions are smaller than those in the continuous market for all strategies.

Keywords: Price Impact, Auctions, Continuous Trading, Trading Costs, Anomalies

JEL Classification: G10, G11, G23, H55, H75, J32, D91