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Pre-open call auction and price discovery: Evidence from India

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  • Rajesh Acharya
  • Vishal Gaikwad

Abstract

Premier stock exchanges in India, viz. National Stock Exchange of India and Bombay Stock Exchange, introduced call auction in the pre-open session from 18 October 2010. This paper analyzes the impact of introduction of pre-open call auction on price discovery at the open. Empirical analysis is based on the familiar market model in an event study framework. The result shows a decline in the market model R -super-2 for both opening and closing returns of stocks forming the part of call auction and also control sample. However, the magnitude of decline is less in the opening prices for the call auction stocks compared with control sample. Furthermore, analysis carried out using the second pass β and R -super-2 regressions shows that the introduction of pre-open call auction does not have any significant impact on market quality. The findings of the study have implications for the future policy-making on the call auction framework.

Suggested Citation

  • Rajesh Acharya & Vishal Gaikwad, 2014. "Pre-open call auction and price discovery: Evidence from India," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-11, December.
    • Handle: RePEc:taf:oaefxx:doi:10.1080/23322039.2014.944668
    DOI: 10.1080/23322039.2014.944668
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    2. Dinabandhu Bag, 2019. "Information Content Of Stocks In Call Auction Of Shorter Duration In Emerging Market," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(4), pages 113-132.

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