臺灣博碩士論文加值系統

Economides and Schwartz (1995) propose that a call method be used to close the market to improve the market efficiency. However, empirical results based on fine methodology design are almost non-existent. Due possibly to the limited types of prevailing trading systems for exchanges around the world, empirical investigations on impacts of a market-close call are rare. Effective as of July 1, 2002, in order to promote the representative, equitableness and objectivity of the closing price, Taiwan Stock Exchange switched from a virtually continuous auction mechanism to a call method to close the market. Under the new mechanism, the market closing price is determined by the batch of orders cumulated over the 5-minute interval prior to the close of the market. This partial change in the microstructure allows us to compare the two trading systems in a more accurate and insightful manner via a fine methodological design in relation to the existing studies.

Our results indicate that relative to the continuous auction method, the periodic call method can reduce price volatility at the expense of trading volume and market liquidity. Furthermore, these changes bear some relations with market characteristics such as stock price, firm size, trading volume, volatility, and trading frequency. Besides, after the introduction of the periodic call method, the price manipulation is almost eliminated. It seems that investors are allured to submit their orders ahead of time as their trading behavior near market closed can be restricted. However, we find that the periodic call trading mechanism can significantly improve the effectiveness of market, by comparing the results from the penultimate 5-minute trading data and the results of the last 10-minute trading data. Under the new trading mechanism, the closing price is hardily manipulated and becomes more stable, representative, and equitable.

In addition to the well-designed methodology, we further discuss the effectiveness of market-close call for elimination of price manipulation and the changes in the investor’s behavior due to the new mechanism. Most importantly, our study can inspect the fruitage of the new regulation executed on July 1, 2002 provide a comprehensive investigation concerning the impact on the market quality of the trading method revolution from a continuous to a call trading system.

Economides and Schwartz (1995) propose that a call method be used to close the market to improve the market efficiency. However, empirical results based on fine methodology design are almost non-existent. Due possibly to the limited types of prevailing trading systems for exchanges around the world, empirical investigations on impacts of a market-close call are rare. Effective as of July 1, 2002, in order to promote the representative, equitableness and objectivity of the closing price, Taiwan Stock Exchange switched from a virtually continuous auction mechanism to a call method to close the market. Under the new mechanism, the market closing price is determined by the batch of orders cumulated over the 5-minute interval prior to the close of the market. This partial change in the microstructure allows us to compare the two trading systems in a more accurate and insightful manner via a fine methodological design in relation to the existing studies.

Our results indicate that relative to the continuous auction method, the periodic call method can reduce price volatility at the expense of trading volume and market liquidity. Furthermore, these changes bear some relations with market characteristics such as stock price, firm size, trading volume, volatility, and trading frequency. Besides, after the introduction of the periodic call method, the price manipulation is almost eliminated. It seems that investors are allured to submit their orders ahead of time as their trading behavior near market closed can be restricted. However, we find that the periodic call trading mechanism can significantly improve the effectiveness of market, by comparing the results from the penultimate 5-minute trading data and the results of the last 10-minute trading data. Under the new trading mechanism, the closing price is hardily manipulated and becomes more stable, representative, and equitable.

In addition to the well-designed methodology, we further discuss the effectiveness of market-close call for elimination of price manipulation and the changes in the investor’s behavior due to the new mechanism. Most importantly, our study can inspect the fruitage of the new regulation executed on July 1, 2002 provide a comprehensive investigation concerning the impact on the market quality of the trading method revolution from a continuous to a call trading system.

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION

1.1 Motivation……………………………………………………………....................1
1.2 Purposes and Contributions……………………………………………………....3

CHAPTER 2: TESTABLE PROPOSITIONS AND RELEVANT LITERATURE

2.1 Market Quality Patterns…………………………..……………………………….7
2.2 Price Manipulation……………………………………………….………………10
2.3 Investors’ Reactions to New Call Mechanism………………………...…………12

CHAPTER 3: DATA AND METHODOLOGY

3.1 Description for the Trading Mechanism of Taiwan Stock Exchange…………….14
3.2 Sample Descriptions……………………………………………………...………16
3.3 Measuring Changes in the Market Quality……………………………………….17
3.3.1 Trading Volume……………………….…………………………………….18
3.3.2 Price Volatility………………………………………………………………19
3.3.3 Liquidity………………………………………………………...…………..20
3.3.4 Price Manipulation………………………………………………………….22
3.4 Sub Sample Reinvestigations and Regression Models……………………..……27
3.4.1 Model 1: Regression of the Difference of Trading Volume…………………28
3.4.2 Model 2: Regression of the Difference of Price Volatility………………….28
3.4.3 Model 3: Regression of the Difference of Liquidity………………………..29
3.4.4 Model 4: Regression of the Difference of Price Errors……………………..29
3.4.5 Model 5: Regression of the Difference of Non-normal Return……………..30
3.4.6 Model 6: Regression of the Difference of Non-normal Volume……………31

CHAPTER 4: EMPIRICAL RESULTS

4.1 Primary Results…………………………………………………………………..32
4.1.1 The Changes of Market Quality…………………………………………….32
4.1.2 Results for Price Manipulation……………………………………………...36
4.2 Robustness Tests………………………………………………………………….41
4.2.1 Using Penultimate Trading Data…………………………………………….41
4.2.2 Using 10-minute trading data……………………………………………….44

CHAPTER 5: CONCLUSIONS
………………………………………………………………………………………..47

REFERENCE
………………………………………………………………………………………..77








LIST OF TABLES

Table 1: Highlight for Taiwan Stock Exchange…………………………...…………50
Table 2: The sample size and the mean time laps between last two trades…………..50
Table 3: The sample descriptions and statistics tests of TV, VOLA, LIQU………….51
Table 4: Subsample statistics tests of TV, VOLA, and LIQU………………………..53
Table 5: Regression models for the difference of TV, VOLA, LIQU………………..55
Table 6: Ratio distribution of PLS=1 to PLS=4……………………………………...57
Table 7: Sample descriptions and statistics tests of DR1 to DR4……………………58
Table 8: Sample descriptions and statistics tests of price manipulation variable, PE
……………………………………………………………………………....59
Table 9: Sample descriptions and statistics tests for two kinds of Non-normal close tests, Non-normal Return Test and Non-normal Trading Volume Test……..62
Table 10: Statistics tests of PE, Non-normal Return Test, and Non-normal Trading Volume Test on specific settlement date …………………...………………65
Table 11: The sample descriptions and statistics tests of TV, VOLA, LIQU–Using penultimate trading data…………………………………………………….67
Table 12: Sample descriptions and statistics tests of DR1 to DR4–Using penultimate trading data………………………………………………………………….69
Table 13: Sample descriptions and statistics tests for two kinds of Non-normal close tests, Non-normal Return Test and Non-normal Trading Volume Test–Using penultimate trading data…………………………………………………….70
Table 14: The sample descriptions and statistics tests of TV, VOLA, LIQU–Using 10-minute trading data……………………………………………………...71
Table 15: Sample descriptions and statistics tests for two kinds of Non-normal close tests, Non-normal Return Test and Non-normal Trading Volume Test–Using 10-minute trading data……………………………………………………...73
Table 16: Regression tests for the difference of price manipulation variable, PE, and two kinds of Non-normal close tests, Non-normal Return Test and Non-normal Trading Volume Test–Using 10-minute trading data…………74


LIST OF FIQURES

Figure 1: The structure change for Taiwan Stock Exchange after the call trading mechanism introduced on July 1, 2002………………………………………………76

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The website of Taiwan Stock Exchange: http://www.twse.com.tw/ch/
The website of Taiwan Futures Exchange: http://www.taifex.com.tw/
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