The effect of Switching from Periodic Call to Continuous Auction Market on Market Quality and Trading Behavior

Jie-Haun LeeDepartment of FinanceNational ChengChi University

Chan Chang Department of Banking and Cooperative Management National Taipei University

Whei-May Fan Department of FinanceChina University of TechnologyThe effect of Switching from Periodic Call to Continuous Auction Market on Market Quality and Trading Behavior1Issue and MotivationPrevious studies:The impact of opening and closing calls on market qualityPrice efficiency and market quality when certain stocks move from one exchange to another or jointly list on different exchangeExperimental comparisons between the call and continuous auction methodsThe impact of trading method switching from call to continuous method or vice versaComparison between open-to-open return volatility and close-to-close return volatility

Issue and MotivationWhy do we do this research?Most of previous studies pay more attention to the impact of a trading mechanism on the price efficiency and market quality. Further examining trading behavior could be helpful to shed light on the impact of a trading mechanism on market quality.The findings of previous studiesPeriodic call Auction vs. Continuous Auction A periodic call auction can overcome the problems of information asymmetry that cause failure in a continuous auction market (Madhavan (1992)). Economides and Schwartz (1995) question the importance of immediacy for many public traders.

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