Continuous Trading or Call Auctions: Revealed Preferences of Investors at the Tel Aviv Stock Exchange

  • Author(s): Avner Kalay, Li Wei, Avi Wohl
  • Published: Dec 17, 2002
  • Pages: 523-542
  • DOI: 10.1111/1540-6261.00431

We use the move of Israeli stocks from call auction trading to continuous trading to show that investors have a preference for stocks that trade continuously. When large stocks move from call auction to continuous trading, the small stocks that still trade by call auction experience a significant loss in volume relative to the overall market volume. As small stocks move to continuous trading, they experience an increase in volume and positive abnormal returns because of the associated increase in liquidity. Overall, though, a move to continuous trading increases the volume of large stocks relative to small stocks.

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