INFORMATION CONTENT OF STOCKS IN CALL AUCTION OF SHORTER DURATION IN EMERGING MARKET

Abstract

Pre-open auctions have been widely implemented across trading exchanges. Pre-open auctions tend to reduce information asymmetry and trading risks. Call auctions have been encouraged to enhance price discovery. This paper explores the shifts in information content of the pre-market auction session over time. We derive that the information content of the pre opening auction did improve little after a gap of two months. We conclude that the intraday 15 minutes realized volatility was influenced by information content in the pre-market. We demonstrate that volatility is the cause of order imbalance or a cause of poor information content. The investigation of the related volatility in the futures segment provides interesting insights on the unusual pre-market imbalances visualized on days close to expiry of futures.

Keywords

• auction
• information
• duration
• volatility