Abstract
AbstractPremier 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 R2 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 R2 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.
Highlights
Market opening and closing are the trickiest times for stock exchanges all over the world
Assessment of the impact of call auction in the pre-open session is carried out using the wellknown market model
It is based on the logic that if call auction results in better price discovery, the market model R2 should increase in the post-call auction period
Summary
Market opening and closing are the trickiest times for stock exchanges all over the world. His thesis titled “Market Microstructure and Market Quality—A Case of National Stock Exchange of India” was awarded with PhD degree in February 2010 by Department of Economics, University of Hyderabad. He is working as assistant professor in the Department of Humanities, Social Sciences and Management at National Institute of Technology Karnataka, Surathkal. He joined as assistant lecturer (from June 2013 to till date) in Department of Economics at Fergusson College, Pune His areas of interest are Behavioural Finance and applied financial econometrics.
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