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A Good Beginning Makes a Good Market: The Effect of Different Market Opening Structures on Market Quality

Gernot Hinterleitner, Philipp Hornung, Ulrike Leopold-Wildburger (), Roland Mestel () and Stefan Palan
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Gernot Hinterleitner: Institute of Statistics and Opterations Research, Karl-Franzens-University Graz
Philipp Hornung: Institute of Statistics and Opterations Research, Karl-Franzens-University Graz
Ulrike Leopold-Wildburger: Institute of Statistics and Opterations Research, Karl-Franzens-University Graz

No 2012-01, Working Paper Series, Social and Economic Sciences from Faculty of Social and Economic Sciences, Karl-Franzens-University Graz

Abstract: This paper deals with the market structure at the opening of the trading day and its influence on subsequent trading. We compare a single continuous double auction and two complement markets with different call auction designs as opening mechanisms in a unified experimental framework. The call auctions differ with respect to their levels of transparency. We find that a call auction not only improves market quality at the beginning of the trading day when com-pared to the stand-alone continuous double auction, but also causes positive spillover effects on subsequent trading. Concerning the design of the opening call auction, we find no signifi-cant differences between the transparent and nontransparent specification with respect to opening prices and liquidity. In the course of subsequent continuous trading, however, market quality is slightly higher after a nontransparent call auction.

Keywords: Call auction; continuous double auction; transparency; market quality (search for similar items in EconPapers)
JEL-codes: D02 D44 G10 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-05-25
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (7)

Published as Hinterleitner, G., Leopold-Wildburger, U., Mestel, R., Palan, S., “A Good Beginning Makes a Good Market: The Effect of Different Market Opening Structures on Market Quality”, Scientific World Journal, Article ID 307808, 2014, 1-14.

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