Premier stock exchanges in India, viz. National Stock Exchange of India and Bombay Stock Exchange, introduced call auction in the pre-open session from 18 October 2010. This paper analyzes the impact of introduction of pre-open call auction on price discovery at the open. Empirical analysis is based on the familiar market model in an event study framework. The result shows a decline in the market model R2 for both opening and closing returns of stocks forming the part of call auction and also control sample. However, the magnitude of decline is less in the opening prices for the call auction stocks compared with control sample. Furthermore, analysis carried out using the second pass â and R2 regressions shows that the introduction of pre-open call auction does not have any significant impact on market quality. The findings of the study have implications for the future policymaking on the call auction framework.
market microstructure call auction pre-open session price discovery market model