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- Title
Does Random Auction Ending Curb Stock Price Manipulation?
- Authors
Lin, Yiping; Michayluk, David; Zou, Mi
- 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.
- Subjects
AUCTIONS; MARKET manipulation; PRICES; MARKET potential
- Publication
Quarterly Journal of Finance, 2023, Vol 11, Issue 3/4, p1
- ISSN
2010-1392
- Publication type
Article
- DOI
10.1142/S2010139224500010