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Journal Article

Trading Halts and Market Activity: An Analysis of Volume at the Open and the Close

Mason S. Gerety and J. Harold Mulherin
The Journal of Finance
Vol. 47, No. 5 (Dec., 1992), pp. 1765-1784
Published by: Wiley for the American Finance Association
DOI: 10.2307/2328995
Stable URL: http://www.jstor.org/stable/2328995
Page Count: 20
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Trading Halts and Market Activity: An Analysis of Volume at the Open and the Close
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Abstract

This paper analyzes how the daily opening and closing of financial markets affect trading volume. We model the desire to trade at the beginning and end of the day as a function of overnight return volatility. NYSE data from 1933-88 indicate that closing volume is positively related to both expected and unexpected volatility from the previous night. We interpret the symmetric response of trading at the open and the close to expected volatility as being due to investor heterogeneities in the ability to bear risk when the market is closed. This desire of investors to trade prior to market closings indicates a cost of mandating marketwide circuit breakers.

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