The Trading Behavior of Attention Securities with Different Closing Mechanisms: Evidence from Taiwan

Yu Chuan Huang () and Shu Hui Chan ()
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Yu Chuan Huang: Department of Finance, National Kaohsiung First University of Science and Technology, 2, Juoyue Road, Nantsu, Kaohsiung 811, Taiwan
Shu Hui Chan: Department of Financial Management, Cheng Shiu University 840, Chengcing Road, Niaosong, Kaohsiung 833, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2014, vol. 17, issue 04, 1-16

Abstract: On 1 July, 2002, the Taiwan Stock Exchange changed its closing mechanism to a five-minute call auction to limit market manipulation at day's end and enhance the fairness of the closing price. This paper examines the effect of the new closing mechanism on the behavior of attention securities and analyzes the role of each trader type in attention securities' behavior. After the new mechanism, market volatility improved, trading activity and order aggressiveness reduced, while liquidity deteriorated. The closing prices of attention securities are mainly influenced by large individual investors and by domestic institutions, with the large individual investors showing the most intention to influence prices upward during the closing interval both before and after implementation of the five-minute call auction. However, introduction of the five-minute call auction made it more difficult and costly to influence closing prices.

Keywords: Attention securities; closing mechanism; trader behavior; manipulation; G14; G15; G18 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S021909151450026X

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