Abstract / Description of output
We model 73.62 million London Stock Exchange (LSE) trades with a combined transaction value of £5.45 ($8.96) trillion. We show that the LSE’s high failure rate to open at the opening call auction only relates to low volume stocks. Evidence suggests that traders opt to hold off trading until the floor opens at 08:00hrs; this decision seems connected to the need to avoid the informed traders who dominate the opening auction. For the largest volume stocks, the opening call auction provides highly efficient opening prices, while the lower volume stocks attain similar levels of price efficiency only after the start of the normal trading hours (NTH). At the close however, all stocks only lose small fractions of informational efficiency achieved during the NTH. Opening prices may influence trader sentiment throughout the trading day, and opening/closing prices may be the basis for settling derivative contracts, they are therefore of great importance.
| Original language | English |
|---|---|
| Number of pages | 59 |
| Publication status | Published - 21 Jun 2014 |
| Event | 2014 Conference of the Financial Engineering and Banking Society (F.E.B.S) - University of Surrey, Guildford, United Kingdom, United Kingdom Duration: 21 Jun 2014 → 23 Jun 2014 |
Conference
| Conference | 2014 Conference of the Financial Engineering and Banking Society (F.E.B.S) |
|---|---|
| Country/Territory | United Kingdom |
| City | Guildford, United Kingdom |
| Period | 21/06/14 → 23/06/14 |
Keywords / Materials (for Non-textual outputs)
- Market efficiency
- Price discovery
- Trading volume