Abstract
We exploit the shift from frequent batch auctions to continuous trading at the Taiwan Stock Exchange to show that liquidity deteriorated in large-cap and efficiency significantly improved in mid-cap and small-cap after trading became continuous. Our results reveal that the migration to the continuous limit order book had heterogeneous effects across stocks. The lack of negative abnormal returns in large-cap for which both liquidity and marginally, efficiency declined, suggests investors value highly the opportunity to trade continuously. Continuous trading increased profits for fast investors that engage in liquidity provision while losses incurred by individual investors did not change significantly.
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