TY - JOUR
T1 - The impact of lunchtime closure on market behaviour
T2 - Evidence from the Sydney Futures Exchange
AU - Frino, Alex
AU - Winn, Roland
PY - 2001/7
Y1 - 2001/7
N2 - This paper examines the impact of lunchtime closure on market behaviour. Between May and September, 1994 the Sydney Futures Exchange trialed lunchtime trading. The trial provides a unique natural laboratory experiment for examining the impact of lunchtime closure. The analysis reported in this paper documents abnormally high bid ask spreads, price volatility and trading volume on re-opening of the market following lunchtime closure. These results confirm that closure has an impact on trading activity, and are consistent with the effects of strategic informed trading, a loss in price discovery and/or trading associated with risk transfer. An abnormal increase in trading volume prior to lunchtime closure is also documented, providing unambiguous evidence of trading activity motivated by risk transfer. Overall these results imply that lunchtime closure disrupts trading activity and reduces market quality by imposing additional costs on market participants.
AB - This paper examines the impact of lunchtime closure on market behaviour. Between May and September, 1994 the Sydney Futures Exchange trialed lunchtime trading. The trial provides a unique natural laboratory experiment for examining the impact of lunchtime closure. The analysis reported in this paper documents abnormally high bid ask spreads, price volatility and trading volume on re-opening of the market following lunchtime closure. These results confirm that closure has an impact on trading activity, and are consistent with the effects of strategic informed trading, a loss in price discovery and/or trading associated with risk transfer. An abnormal increase in trading volume prior to lunchtime closure is also documented, providing unambiguous evidence of trading activity motivated by risk transfer. Overall these results imply that lunchtime closure disrupts trading activity and reduces market quality by imposing additional costs on market participants.
UR - http://www.scopus.com/inward/record.url?scp=36549019318&partnerID=8YFLogxK
U2 - 10.1111/1467-629X.00052
DO - 10.1111/1467-629X.00052
M3 - Article
AN - SCOPUS:36549019318
SN - 0810-5391
VL - 41
SP - 25
EP - 40
JO - Accounting and Finance
JF - Accounting and Finance
IS - 1-2
ER -