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The Trading Behavior of Attention Securities with Different Closing Mechanisms: Evidence from Taiwan

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  • Yu Chuan Huang

    (Department of Finance, National Kaohsiung First University of Science and Technology, 2, Juoyue Road, Nantsu, Kaohsiung 811, Taiwan)

  • Shu Hui Chan

    (Department of Financial Management, Cheng Shiu University 840, Chengcing Road, Niaosong, Kaohsiung 833, Taiwan)

Abstract

On 1 July, 2002, the Taiwan Stock Exchange changed its closing mechanism to a five-minute call auction to limit market manipulation at day's end and enhance the fairness of the closing price. This paper examines the effect of the new closing mechanism on the behavior of attention securities and analyzes the role of each trader type in attention securities' behavior. After the new mechanism, market volatility improved, trading activity and order aggressiveness reduced, while liquidity deteriorated. The closing prices of attention securities are mainly influenced by large individual investors and by domestic institutions, with the large individual investors showing the most intention to influence prices upward during the closing interval both before and after implementation of the five-minute call auction. However, introduction of the five-minute call auction made it more difficult and costly to influence closing prices.

Suggested Citation

  • Yu Chuan Huang & Shu Hui Chan, 2014. "The Trading Behavior of Attention Securities with Different Closing Mechanisms: Evidence from Taiwan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 17(04), pages 1-16.
    • Handle: RePEc:wsi:rpbfmp:v:17:y:2014:i:04:n:s021909151450026x
    DOI: 10.1142/S021909151450026X
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    References listed on IDEAS

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    Cited by:

    1. Alfred Ma, 2022. "Profitability of technical trading strategies under market manipulation," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-9, December.
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    3. Eyup Kadioðluu & Guray Kuçukkocaoglu & Saim Kilic, 2015. "Closing price manipulation in Borsa Istanbul and the impact of call auction sessions," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 15(3), pages 213-221, September.

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    More about this item

    Keywords

    Attention securities; closing mechanism; trader behavior; manipulation; G14; G15; G18;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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