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

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  • Bogousslavsky, Vincent
  • Muravyev, Dmitriy

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.

Suggested Citation

  • Bogousslavsky, Vincent & Muravyev, Dmitriy, 2023. "Who trades at the close? Implications for price discovery and liquidity," Journal of Financial Markets, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finmar:v:66:y:2023:i:c:s1386418123000502
    DOI: 10.1016/j.finmar.2023.100852
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    More about this item

    Keywords

    Closing auction; Passive investing; Price pressure; Liquidity;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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