Empirical regularities of opening call auction in Chinese stock market

TL;DR

This paper analyzes the statistical regularities of the opening call auction in the Chinese stock market, revealing asymmetries, long-term memory, order clustering, and price level effects using high-frequency data.

Contribution

It provides a comprehensive empirical analysis of order price and size distributions, long-term memory, and price clustering in Chinese stock market opening call auctions.

Findings

Asymmetric distribution of relative prices with peaks at zero and negative values

Presence of long-term memory in order prices and sizes

Exponential decrease in volume and order count with distance from best prices

Abstract

We study the statistical regularities of opening call auction using the ultra-high-frequency data of 22 liquid stocks traded on the Shenzhen Stock Exchange in 2003. The distribution of the relative price, defined as the relative difference between the order price in opening call auction and the closing price of last trading day, is asymmetric and that the distribution displays a sharp peak at zero relative price and a relatively wide peak at negative relative price. The detrended fluctuation analysis (DFA) method is adopted to investigate the long-term memory of relative order prices. We further study the statistical regularities of order sizes in opening call auction, and observe a phenomenon of number preference, known as order size clustering. The probability density function (PDF) of order sizes could be well fitted by a $q$-Gamma function, and the long-term memory also exists in order sizes. In addition, both the average volume and the average number of orders decrease exponentially with the price level away from the best bid or ask price level in the limit-order book (LOB) established immediately after the opening call auction, and a price clustering phenomenon is observed.