Effective extension of trading hours

  • Kotaro Miwa


To uncover the complex feature of the effect of extending trading hours, I analyze what kind of the extension is effective on price efficiency and price stability, by utilizing an agent-based market model. Specifically, I examine whether the partial extension of trading hours—namely implementing the pre-market session and the after-hours session—and what duration of the session is effective. The simulation result reveals that the implementation of both sessions could have a negative impact on price efficiency and stability if investors’ participation during the session is limited; it could result in more concentrated trading in the opening session, wider divergence between market prices and the fundamental value, and lower price stability. In addition, longer sessions are less beneficial (or more harmful). My result also shows that there are very few benefits to trade during the extended-hours sessions. Thus, my findings suggest that the extended-hours trading has a structural weakness which causes illiquidity during the session and lowers price efficiency and price stability during the regular-hour session. However, I find that the implementation of the pre-market session is far more beneficial than that of the after-hours session; exceptionally, the implementation of the short-term pre-market session could induce higher price efficiency and higher price stability regardless of the number of market participants during the session.


Extended-hours trading Agent-based market model Price efficiency Price stability 

JEL Classification

D40 D53 G17 G19 


Compliance with ethical standards

Conflict of interest

The author declares that they have no conflict of interest.

Ethical standards

This article does not contain any studies with human participants performed by any of the authors.

Informed consent

Informed consent was obtained from all individual participants included in the study.


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Copyright information

© Japan Association for Evolutionary Economics 2018

Authors and Affiliations

  1. 1.Tokio Marine Asset ManagementTokyoJapan

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