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Effects of opening trading mechanism and information flow on return volatility: additional evidence from the Istanbul Stock Exchange

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2009
Başer, Alper
In this study, the effects of opening trading mechanism and information flow on return volatility are examined in the Istanbul Stock Exchange. The change in the morning opening mechanism from a continuous auction to a call auction on February 2, 2007 and the extension in afternoon trading hours on September 7, 2007 provide unique opportunities in this respect. First, it is found that the call auction trading mechanism has a decreasing effect on the morning open-to-open interday volatility and morning intraday volatility for low-volume stocks but it does not have an obvious effect on the same type of volatilities for high volume stocks. Second, the study provides evidence that the increased information flow towards the end of the trading day increases the afternoon close-to-close interday volatility for high volume stocks while it does not have such an effect on low-volume stocks. Third, the overnight return volatility is decreased slightly with the extension of trading hours.