The Hong Kong Stock Exchange (HKEx) adopted a closing call auction in 2008 but suspended its operation ten months later due to suspicion of widespread price manipulation. The Exchange relaunched the auction in 2016 with manipulation-deterrence enhancements. We exploit this unique setting by applying a triple-differences (DDD) methodology to examine the causal effect of call auction design on closing price manipulation. Our results indicate that a plain-vanilla call auction mechanism is prone to closing price manipulation. Under this mechanism overnight price reversal is more pronounced on days when derivatives expire and on days with large orders submitted just before the market close.
|Publication status||Not published / presented only - 14 Jul 2020|
|Event||The 16th Annual Conference of the Asia-Pacific Association of Derivatives (APAD) - Online|
Duration: 14 Jul 2020 → 14 Jul 2020
|Conference||The 16th Annual Conference of the Asia-Pacific Association of Derivatives (APAD)|
|Period||14/07/20 → 14/07/20|