Who trades at the close? Implications for price discovery and liquidity

Vincent Bogousslavsky and Dmitriy Muravyev

Journal of Financial Markets, 2023, vol. 66, issue C

Abstract: Closing auctions set daily closing prices for U.S. stocks and account for a striking 7.5% of daily volume in 2018, up from 3.1% in 2010. We study closing auctions in the new regime of record volume. Closing auctions appear to match volumes at low cost: closing prices typically match pre-close bid or ask prices, and price impact is lower than during continuous trading. Auction price deviations revert quickly and almost completely, on average. Auction-to-intraday volume spikes on S&P 500 additions and increases permanently afterwards, suggesting that closing volume is fueled directly and indirectly by the growth of indexing and ETFs.

Keywords: Closing auction; Passive investing; Price pressure; Liquidity (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:66:y:2023:i:c:s1386418123000502

DOI: 10.1016/j.finmar.2023.100852

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