EconPapers    
Economics at your fingertips  
 

Passive investors and concentration of intraday liquidity: Evidence from the Tokyo Stock Exchange

Kiichi Kitajima

Pacific-Basin Finance Journal, 2022, vol. 74, issue C

Abstract: This paper uses the revision of the Tokyo Stock Exchange's circuit breakers in 2019 as a natural experiment to provide empirical evidence that passive investors’ executions are concentrated and affect intraday liquidity. After the revision, which attracts the passive traders to execute at the close, the stock more owned by passive funds: (i) has more concentrated execution at closing auctions; (ii) reduces its transaction costs more in continuous sessions; and (iii) has less price-efficient overnight return. These findings are consistent with the implication of the dynamic limit order market model in the previous research that indicated the passive investor has higher costs to wait for the execution. Our results imply the importance of the passive investors’ intraday behavioral change due to a shift in execution constraints, especially when the passive investments have a high market share.

Keywords: Passive investment; Circuit breakers; Limit order market; Liquidity; Market microstructure; Price efficiency (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X2200107X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:74:y:2022:i:c:s0927538x2200107x

DOI: 10.1016/j.pacfin.2022.101812

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-11-19
Handle: RePEc:eee:pacfin:v:74:y:2022:i:c:s0927538x2200107x