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What is Special about the Opening? Evidence from NASDAQ

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Authors
Cao, Charles; Choe, Hyuk; Hatheway, Frank
Issue Date
1997
Publisher
College of Business Administration (경영대학)
Citation
Seoul Journal of Business Vol3(1): 1~36(1997)
Keywords
individual stock; opening and closing variance; bid-ask bounce
Abstract
This paper reports that prices of NASDAQ stocks are more volatile around the market
opening than closing. Evidence fiom individual stocks indicates that there is a systematic
relationship between the excess opening volatility and trading activity. Much of the excess
opening volatility is related to two factors, bid-ask bounce and price formation. For inactively
traded stocks, bid-ask bounce contributes almost all of the transitory volatility as opposed to
20?! of the transitory volatility for actively traded stocks. On the other hand, price formation
is the primary source of the difference between the opening and closing variances for actively
traded stocks. We also find price formation occurs in the absence of trading as quotes
updated prior to the 9:30 AM. start of trading reflect new information.
ISSN
1226-9816
Language
English
URI
http://hdl.handle.net/10371/1743
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of BusinessSeoul Journal of Business Volume 03, Number 1 (1997)
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