Call auction frequency and market quality: Evidence from the Taiwan Stock Exchange

Publication Type:
Journal Article
Citation:
Journal of Asian Economics, 2018, 57 pp. 53 - 62
Issue Date:
2018-08-01
Metrics:
Full metadata record
Files in This Item:
Filename Description Size
1-s2.0-S1049007818300319-main.pdfPublished Version484.1 kB
Adobe PDF
© 2018 Financial market quality is generally assessed with respect to efficiency, liquidity, and stability. The frequency of trading contributes to these attributes. The Taiwan Stock Exchange uses a periodic call auction as its main trading mechanism. From 2010 to 2014 the call auction interval was reduced four times, from 25 to 5 s, providing a natural experiment to test the impact on market quality. Using multiple measures of efficiency, liquidity, and stability we provide evidence that the reductions in call auction interval have improved overall market quality. We find that higher auction frequencies are associated with a lower trade-to-auction ratio and less aggressive trading behaviour. The evidence suggests that there are more gains to be made through further reduction in the call auction interval to around 2 s.
Please use this identifier to cite or link to this item: