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Pre-close Transparency and Price Efficiency at Market Closing: Evidence from the Taiwan Stock Exchange

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  • Cheng-Yi Chien

Abstract

This paper examines the impact of increased pre-close transparency on the effectiveness of stock closing call. On January 1, 2003, the Taiwan Stock Exchange increases pre-close transparency by disclosing the best five bid and ask prices and related unexecuted orders before market closing. At the same time, the Taiwan Stock Exchange does not disseminate any information about the limit-order book during the five-minute closing call period. This institutional change presents an opportunity to analyze how an increase in pre-close transparency affects informed trading and price efficiency near market closing. Empirical results show that an increase in pre-close transparency enhances the price efficiency of stock closing call, implying that informed traders will increase their trading during stock closing call following pre-close transparency increases.

Suggested Citation

  • Cheng-Yi Chien, 2013. "Pre-close Transparency and Price Efficiency at Market Closing: Evidence from the Taiwan Stock Exchange," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 7(2), pages 17-26.
    • Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:17-26
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    References listed on IDEAS

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    More about this item

    Keywords

    Transparency; Closing Call; Price Efficiency; Taiwan Stock Exchange;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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