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Market quality changes in the London Stock Market

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  • Chelley-Steeley, Patricia L.

Abstract

This paper examines the impact that the introduction of a closing call auction had on market quality at the London Stock Exchange. Using estimates from the partial adjustment with noise model of Amihud and Mendelson [Amihud, Y., Mendelson, H., 1987. Trading mechanisms and stock returns: An empirical investigation. Journal of Finance 42, 533-553] we show that opening and closing market quality improved for participating stocks. When we stratify our sample securities into five groups based on trading activity we find that the least active securities experience the greatest improvements to market quality. A control sample of stocks are not characterized by discernable changes to market quality.

Suggested Citation

  • Chelley-Steeley, Patricia L., 2008. "Market quality changes in the London Stock Market," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2248-2253, October.
    • Handle: RePEc:eee:jbfina:v:32:y:2008:i:10:p:2248-2253
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    13. repec:bla:intfin:v:5:y:2002:i:3:p:437-61 is not listed on IDEAS
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    Cited by:

    1. Liu, Jie & Wu, Chonglin & Yuan, Lin & Liu, Jia, 2022. "Opening price manipulation and its value influences," International Review of Financial Analysis, Elsevier, vol. 83(C).
    2. Afego, Pyemo N., 2017. "Effects of changes in stock index compositions: A literature survey," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 228-239.
    3. Damien Challet & Nikita Gourianov, 2018. "Dynamical regularities of US equities opening and closing auctions," Post-Print hal-01702726, HAL.
    4. Sumon Kumar Bhaumik & Manisha Chakrabarty & Ali M. Kutan & Ekta Selarka, 2021. "How Effective are Stock Market Reforms in Emerging Market Economies? Evidence from a Panel VAR Model of the Indian Stock Market," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(4), pages 795-818, December.
    5. Chelley-Steeley, Patricia & Lambertides, Neophytos & Savva, Christos S., 2013. "Illiquidity shocks and the comovement between stocks: New evidence using smooth transition," Journal of Empirical Finance, Elsevier, vol. 23(C), pages 1-15.
    6. Deb, Saikat Sovan & Kalev, Petko S. & Marisetty, Vijaya B., 2010. "Are price limits really bad for equity markets?," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2462-2471, October.
    7. Go, You-How & Lau, Wee-Yeap, 2020. "The impact of global financial crisis on informational efficiency: Evidence from price-volume relation in crude palm oil futures market," Journal of Commodity Markets, Elsevier, vol. 17(C).
    8. Hung, Pi-Hsia & Lien, Donald, 2019. "Trading aggressiveness, order execution quality, and stock price movements: Evidence from the Taiwan stock exchange," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 60(C), pages 231-251.
    9. Silvio John Camilleri, 2015. "The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(2), pages 44-53, April.
    10. Jiayi Li & Sumei Luo & Guangyou Zhou, 2021. "Call auction, continuous trading and closing price formation," Quantitative Finance, Taylor & Francis Journals, vol. 21(6), pages 1037-1065, June.
    11. Camilleri, Silvio John, 2015. "Do call auctions curtail price volatility? Evidence from the National Stock Exchange of India," MPRA Paper 95301, University Library of Munich, Germany.
    12. Theissen, Erik & Westheide, Christian, 2020. "Call of duty: Designated market maker participation in call auctions," Journal of Financial Markets, Elsevier, vol. 49(C).
    13. Daya, Wael & Mazouz, Khelifa & Freeman, Mark, 2012. "Information efficiency changes following FTSE 100 index revisions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 1054-1069.
    14. repec:eme:jfrcpp:v:20:y:2012:i:1:p:99-110 is not listed on IDEAS
    15. Chelley-Steeley, Patricia L. & Skvortsov, Leonid, 2010. "Efficiency and the trading system: The case of SETSmm," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(5), pages 509-518, December.
    16. Bogousslavsky, Vincent & Muravyev, Dmitriy, 2023. "Who trades at the close? Implications for price discovery and liquidity," Journal of Financial Markets, Elsevier, vol. 66(C).
    17. Crystal Xiaobei Chen, 2012. "The anatomy of short sales and price adjustment: evidence from the Hong Kong stock market," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 8(3), pages 204-218, June.
    18. Zhang, Zeyu & Ibikunle, Gbenga, 2023. "The market quality effects of sub-second frequent batch auctions: Evidence from dark trading restrictions," International Review of Financial Analysis, Elsevier, vol. 89(C).
    19. Ibikunle, Gbenga, 2015. "Opening and closing price efficiency: Do financial markets need the call auction?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 208-227.
    20. Chelley-Steeley, Patricia L. & Lambertides, Neophytos & Steeley, James M., 2015. "The effects of non-trading on the illiquidity ratio," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 204-228.
    21. Bollen, Nicolas P.B. & Christie, William G., 2009. "Market microstructure of the Pink Sheets," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1326-1339, July.
    22. Yiping Lin & David Michayluk & Mi Zou, 2023. "Does Random Auction Ending Curb Stock Price Manipulation?," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 13(04), pages 1-33, December.
    23. Ya‐Kai Chang & Robin K. Chou & J. Jimmy Yang, 2020. "A rare move: The effects of switching from a closing call auction to a continuous trading," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(3), pages 308-328, March.
    24. Kian-Ping Lim & Weiwei Luo & Jae H. Kim, 2013. "Are US stock index returns predictable? Evidence from automatic autocorrelation-based tests," Applied Economics, Taylor & Francis Journals, vol. 45(8), pages 953-962, March.

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