The Impact of Pre-closing Implementation to Price Efficiency in Indonesia Stock Exchange

• Main Author: Gilang Praditiyo
• Format: Article
• Language: English
• Published: Universitas Indonesia 2014-01-01
• Series: Indonesian Capital Market Review
• Online Access: http://journal.ui.ac.id/index.php/icmr/article/view/2986

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mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} </style> <![endif]--> <p class="MsoNormal" style="margin-top: 0in; margin-right: 19.3pt; margin-bottom: 10.0pt; margin-left: .25in; text-align: justify; tab-stops: 85.05pt;"><em style="mso-bidi-font-style: normal;"><span style="font-size: 12.0pt; line-height: 115%; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; mso-bidi-font-family: Arial;" lang="FR">Indonesia Stock Exchange has really concerned about improving stock market quality these days. One of the effort is pre-closing trading session implementation. It refers to Decision of the Board of Directors of The Indonesia Stock Exchange Number Kep-00399/BEI/11-2012, regarding Amendment to Rule Number II-A concerning Equity-Type Securities Trading. The rule is effective on 2^nd Januar, 2013 and Indonesia Stock Exchange has implemented it since that date. The purposes of pre-closing implementation are to mitigate marking the close, which is the practice of buying security at the very end of the trading day at a significantly higher price than the current price of the security, and to improve market quality. This paper attempts to veryfy whether the impact of pre-closing implementation to price efficiency is positive or not. The result shows that the pre-closing implementation has the positive impact to price efficiency. It reduces the return volatility and market manipulation at<span style="mso-spacerun: yes;">&nbsp; </span>the closing time which also means that the pre-closing implementation has effectively improved market quality in Indonesia Stock Exchange. </span></em><em style="mso-bidi-font-style: normal;"></em></p> <p class="NoSpacing4" style="margin-top: 0in; margin-right: 19.3pt; margin-bottom: .0001pt; margin-left: .25in;"><strong style="mso-bidi-font-weight: normal;"><em style="mso-bidi-font-style: normal;"><span style="font-size: 12.0pt; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;;" lang="IN">Keywords</span></em></strong><em style="mso-bidi-font-style: normal;"><span style="font-size: 12.0pt; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;;" lang="IN">:Pre-closing, price manipulation, marking the close, volatility, price efficiency.</span></em></p>