Indian Journal of Finance October
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Does the Pre-Open Auction Market Improve Efficiency of Price Discovery in Stock Markets? Evidence from India

Affiliations

  • Assistant Professor, University School of Management Studies, GGSIP University, Sector 16 C, Dwarka, New Delhi - 110 006, India
  • Analyst, Financial Services Division, Evalueserve, Gurgaon, Haryana, India

Abstract


The paper analyzed the impact of opening call auction on the efficiency of price discovery at the National Stock Exchange (NSE), India by studying the returns and volatility behavior of one benchmark index (NSE's Nifty) and 10 Nifty component companies selected on random. The paper used the closing prices for the period 3 years before and 3 years after the introduction of the call auction market in 2010. Descriptive statistics, one-way ANOVA, augmented Dickey-Fuller unit-root Test, and ARCH-GARCH type methodology was employed for the analysis. The paper found no significant difference in the returns during the two periods, though a reduction in volatility was observed. The introduction of the pre-open auction market resulted in an improvement in the efficiency of price discovery of various stocks. The findings of the paper offer valuable inputs for stock market regulators as well as investors.

Keywords

Efficiency of Price Discovery, Pre-Open Call Auction, One-Way ANOVA, Augmented Dickey-Fuller Unit-Root Test, ARCH-GARCH

G11, G14, N25

Paper Submission Date : January 27, 2015 ; Paper sent back for Revision : June 19, 2015 ; Paper Acceptance Date : July 7 , 2015.


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