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Intraday volatility characteristics throughout the trading week are examined at the emerging Borsa Istanbul (BIST) stock exchange. Using five-minute (and 15-minute) intervals, accentuated intraday volatility patterns at the microstructure level are examined during the stock market open and close in the morning and in the afternoon sessions. Volatility is highest when markets open in the morning. The second highest is during the afternoon open. The third highest is before the market closes for the day. Volatility before the market close has increased in recent years. These characteristics are seen every trading day. There are also differences: Monday returns are lowest, Friday returns are highest, and Monday morning volatility is highest of the entire trading week. Day-of-the-week and intraday accentuated volatility smile anomalies are jointly investigated using the longest intraday sample period in the emerging country stock exchange literature. Investment companies and professionals can utilize the results for risk management and hedging by avoiding highly volatile opening and closing periods. Arbitrageurs, speculators, and risk takers should trade during these highly volatile periods. Heightened volatility is increased difficulty in price discovery, thus inefficiency. Market participants, exchanges, and public prefer efficient markets. The research presents evidence of trading days, and periods during the trading day, when the exchange becomes more efficient. This is the first research that explores day-of-the-week effect from intraday volatility perspective in an emerging market, and provides useful recommendations in designing risk management strategies at market microstructure level.

This paper examines the attempts to create new online markets for the trading of wholesale standardized goods during the late 1990s. The vast majority of these business-to-business (“B2B”) exchanges failed. These failed attempts provide invaluable data on the necessary underpinnings of online commodity markets and the social dynamics that drive them. Focusing on the US market for propane as our case, we discuss the model that drove the development of many business-to-business exchanges, the social dynamics of the propane industry and the attempts to create an online propane market, the role of informal risk management, and some initial lessons about the design of markets. Ignoring the behavioral realities of markets led to designs and technology that in many cases were incompatible with the needs of market participants.

This paper investigates Japanese stock returns for the Friday, Monday and Tuesday surrounding U.S. Monday holiday closures. The empirical results show that U.S. Monday closures have a statistically significant impact on Japanese stock return dynamics for surrounding trading days, but do not support the hypothesis that the U.S. Monday and Japanese Tuesday effects are related. Potential explanations for the occurrence and then disappearance of the Japanese Tuesday effect rely on market microstructure properties unique to the Tokyo market. The spillover effects from New York to Tokyo have been increased in density over time, which is attributed to market structural changes represented by the introduction of Nikkei 225 index futures on the SIMEX in 1986.

Microstructure noise contaminates high-frequency estimates of asset price volatility. Recent work has determined a preferred sampling frequency under the assumption that the properties of noise are constant. Given the sampling frequency, the high-frequency observations are given equal weight. While convenient, constant weights are not necessarily efficient. We use the Kalman filter to derive more efficient weights, for any given sampling frequency. We demonstrate the efficacy of the procedure through an extensive simulation exercise, showing that our filter compares favorably to more traditional methods.