Switching to Continuous Trading and its Impact on Return Behavior and Volume of Trade

The study investigates changes that occurred following the transfer of 29 stocks in Israel from a single daily auction to a more continuous-like trading system. On average, the standard deviation of daily market model residuals decreased, and trading volumes increased. This suggests that continuous trading promotes end-of-day price efficiency and better suits investors' trading-mechanism preferences. An interesting phenomenon observed is that the noisiness of end-of-day prices decreases immediately after the transfer, while volume rises only later on. This constitutes evidence that adding rounds of trade contributes to price accuracy even when trading volumes do not increase.