NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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On Frequent Batch Auctions for Stocks

Ravi Jagannathan

NBER Working Paper No. 26341
Issued in October 2019
NBER Program(s):Asset Pricing Program

I show that frequent batch auctions for stocks have the potential to reduce the severity of stock price crashes when they occur. For a given sequence of orders from a continuous electronic limit order book market, matching orders using one second apart batch auctions results in nearly the same trades and prices. Increasing the time interval between auctions to one minute significantly reduces the severity stock price crashes. In spite of this and other advantages pointed out in the literature, frequent batch auctions have not caught on. There is a need for carefully designed market experiments to understand why, and what aspect of reality academic research may be missing.

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Document Object Identifier (DOI): 10.3386/w26341

 
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