Question A:
Stock markets around the world have seen an increasing concentration of trades in or near the closing auction. In the US, for example, about a third of all S&P 500 stock trades are now executed in the final ten minutes of the session, up from 27% in 2021.
The increased concentration of trading in the final minutes of the trading day has a measurably detrimental effect on market quality.
Responses
Responses weighted by each expert's confidence
Question B:
Strict indexing implemented with trading at the close to avoid tracking error creates a measurable performance drag that could be avoided with more flexible passive strategies.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 John Campbell |
Harvard | Bio/Vote History | ||
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I believe this is true because a high proportion of traders at the close are using market orders rather than limit orders. (With sufficient intensity of limit orders, the opposite could be true.)
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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I know of little solid understanding why this happens, less still that it reflects an externality -- some reason why if people don't like it they can't do otherwise. Trading naturally bunches in time. Let's stop chicken-littleing every interesting feature of markets.
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 Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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 Wenxin Du |
HBS | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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Concentrated trading at the close improves liquidity at the close, reduces liquidity away from the close. For the average trade, market depth and liquidity are better. But how much weight should one apply to the reduced intra-day liquidity, and the resulting delays?
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 Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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I don’t know of any evidence on this one.
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 Xavier Gabaix |
Harvard | Did Not Answer | Bio/Vote History | |
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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While US markets are relatively liquid, the growing emphasis on trade at close runs the risk of increasing slippage - especially for smaller names.
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 Harrison Hong |
Columbia | Bio/Vote History | ||
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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 Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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I'm confident that the answer is uncertain. Welfare effects are notoriously hard to compute, and without knowing more about the motivation for these trades, and the counterparties involved, it's difficult to assess their impact on market efficiency and social welfare.
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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 Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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My reading of the available evidence is that the answer is not clear at this point
-see background information here -see background information here |
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Given that agents can choose when to trade, market quality is complex to measure. Trading at the same point in time can be efficient.
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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 Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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 Paola Sapienza |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Concentrating trading tends to make the market more liquid
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Increased trading in last few minutes could increase price volatility, order imbalance, noise, and market depth in the remainder of the day
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Nothing stops an index fund from choosing a different strategy, or people from choosing a different fund.
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Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Wenxin Du |
HBS | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Concentrating at the close should improve closing-market market depth. Although informed traders could also gravitate to the close, creating adverse-selection costs, welfare need not deteriorate (Admati and Pfleiderer, 1988).
-see background information here |
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Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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Xavier Gabaix |
Harvard | Did Not Answer | Bio/Vote History | |
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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It is better to increase the tracking error budget to allow for more efficient minimization of slippage (i.e., gradually working the trade). We know that binding tracking error budgets impose a constraint - the cost of which is often decreased performance.
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Harrison Hong |
Columbia | Bio/Vote History | ||
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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Same reason as the answer to the previous question. Flexibility sounds good, but does this mean that alpha can be generated by choosing "opportune" times to trade---sounds like HFT...
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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While there is some evidence of an overnight reversal (e.g., price movements in last ten minutes are partially reversed in overnight trading), the magnitude of these reversals is relatively small and some evidence suggests they may be driven by noise at the market opening
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Strict indexing creates a trading constraint which should lead to worse execution, but how detrimental this is remains an open question.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Unclear that price impact at the close is higher than at other times.
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Paola Sapienza |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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There could be a performance drag, but probably not a substantial one.
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Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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drag from price volatility, price slippage, opportunity cost of transacting at more favorable prices earlier in the day or at less volatile times
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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