CLOSING PRICE MANIPULATION IN INDONESIA STOCK MARKET AND IMPACT OF THE IMPLEMENTATION OF PRE-CLOSING

Arsyil Hendra Saputra, Ruslan Prijadi

Research output: Contribution to conferencePaperpeer-review

Abstract

There are obvious incentives for market participants to manipulate the closing price due to the significance of the closing price, the price that is most commonly used for many purposes. To ensure more effective price formation at closing price, on January 2, 2013, the Indonesia Stock Exchange (IDX) introduced a pre-closing call auction method to close the stock market. The purpose of this paper is to investigate its effect on closing price manipulation using intraday data. The analysis focuses on 4 months before and 4 months after the introduction of pre-closing, which is from September 2012 to April 2013. We use a representative sample which includes 37 stocks that composed the LQ45 stock index, the most liquid and largest market capitalization stocks, for the whole period. In this paper, we discuss some of the empirically observed intraday patterns both before and after the implementation of pre-closing. Our data suggest that the last 10-minute of trading is the most active of the whole day. We document that before the introduction of pre-closing, the 10-minute returns of both the IDX Composite Index (IHSG) and our sample stocks increased dramatically. To determine whether or not manipulation of closing prices exists, this study uses a test developed by Felixson and Pelli (1999). Our results reveal the existence of closing price manipulation in Indonesia stock market and show that the implementation of pre-closing has reduced closing price manipulation.
Original languageEnglish
Publication statusPublished - 2017
EventThe2017 International Conference on Management Sciences ( ICoMS 2017) - ID, Yogyakarta, Indonesia
Duration: 1 Jan 2017 → …

Conference

ConferenceThe2017 International Conference on Management Sciences ( ICoMS 2017)
CountryIndonesia
CityYogyakarta
Period1/01/17 → …

Keywords

  • Closing Price Manipulation, Pre-Closing, Indonesia Stock Market, And Intraday Data.

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