The role of daytime stock auctions in intraday return seasonality

The paper provides a fresh look at the role of daytime auctions in intraday periodicity of stock returns. First, I show that daytime auctions, together with market opening and market closing intervals, drive the periodicity of stock returns. Second, by applying the model of infrequent rebalancing, I find that price impact is the highest during the fifteen-minute interval after daytime auctions. Combining this evidence with high realized returns, high volume changes and high return volatility, I conclude that after-auction periods take over a large share of infrequent rebalancing, being attractive for a concentration of liquidity traders. Small, low-fragmented stocks heavily traded on the home market show the strongest evidence for infrequent rebalancing after the daytime auctions. Finally, I show that post-auction returns predict returns before the US market opening and before the domestic market closing, which might be further evidence on clustered liquidity trading