November 12, 2019
The closing price is the most important stock price of the day, but is it better than alternatives? Closing prices are determined in a special call auction. This single trade accounts for 7.3% of daily stock volume in 2018 and is strongly associated with ETF ownership and institutional rebalancing. Strikingly, this huge volume contributes nothing to price discovery. Closing prices frequently and significantly deviate from closing quote midpoints, but these deviations fully revert overnight.