Measuring the effectiveness of volatility auctions

Carlos Castro, Diego A. Agudelo, Sergio Preciado

Research output: Contribution to journalArticlepeer-review

Abstract

We propose a method for event studies based on synthetic portfolios that provides a robust data-driven approach to build a credible counterfactual. The method is used to evaluate the effectiveness of volatility auctions using intraday data from the Colombian Stock Exchange. The results indicate that the synthetic portfolio method provides an accurate way to build a credible counterfactual that approximates the behavior of the asset if the auction had not taken place. The main results indicate that the volatility auction mitigates the volatility of the asset, but its effect on liquidity and trading activity is ambiguous at best.

Original languageEnglish (US)
Pages (from-to)566-581
Number of pages16
JournalInternational Review of Economics and Finance
Volume70
DOIs
StatePublished - Nov 2020

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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