{"title":"Does Random Auction Ending Curb Stock Price Manipulation?","authors":"Yiping Lin, David Michayluk, Mi Zou","doi":"10.1142/s2010139224500010","DOIUrl":null,"url":null,"abstract":"<p>This paper examines the effect on stock market efficiency and potential market manipulation of introducing a random ending time for the call auctions that start and end continuous trading on three equity markets. We find that the probability of a price dislocation at the end of the auction declines, indicating a lower risk of market manipulation. In addition, the variance ratio and market-adjusted return volatility measures decrease, suggesting a more efficient and less volatile price discovery process. We confirm a behavioral change in order submissions by observing the timing of order entry, amendments, and deletions on one of the exchanges for which we have access to order data. Overall, our results indicate that adding a random auction ending time can reduce the risk of stock market manipulation and improve price efficiency.</p>","PeriodicalId":45339,"journal":{"name":"Quarterly Journal of Finance","volume":null,"pages":null},"PeriodicalIF":0.9000,"publicationDate":"2023-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Quarterly Journal of Finance","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.1142/s2010139224500010","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper examines the effect on stock market efficiency and potential market manipulation of introducing a random ending time for the call auctions that start and end continuous trading on three equity markets. We find that the probability of a price dislocation at the end of the auction declines, indicating a lower risk of market manipulation. In addition, the variance ratio and market-adjusted return volatility measures decrease, suggesting a more efficient and less volatile price discovery process. We confirm a behavioral change in order submissions by observing the timing of order entry, amendments, and deletions on one of the exchanges for which we have access to order data. Overall, our results indicate that adding a random auction ending time can reduce the risk of stock market manipulation and improve price efficiency.
期刊介绍:
The Quarterly Journal of Finance publishes high-quality papers in all areas of finance, including corporate finance, asset pricing, financial econometrics, international finance, macro-finance, behavioral finance, banking and financial intermediation, capital markets, risk management and insurance, derivatives, quantitative finance, corporate governance and compensation, investments and entrepreneurial finance.