RT Conference Proceedings
T1 Price Discovery in the Pre-Opening Period. Theory and Evidence from the Madrid Stock Exchange
A1 Brusco, Sandro
A1 Manzano, Carolina
A1 Tapia, Mikel
AB Some stock exchanges, such as the Spanish Stock Exchange and Euronext (Paris), allow traders to place orders in a `pre-opening' period. Orders placed in this period are used to determine the opening price, and can be cancelled at any moment and at no cost by the traders. We consider a model in which noise traders can appear in the market before or after the opening, and a strategic informed trader decides her order strategy at the preopening and at the opening period. We characterize the equilibrium of such a model, showing that at the pre-opening there is a non-monotonic relation between the aggregate quantity ordered and prices. Thus, the equilibrium at the preopening stage is determined in a way which is fundamentally diferent from the equilibrium in the open market. We proceed to study the implications of the existence of a pre-opening period on information revelation and on the determination of the opening price. We present evidence from the Spanish Stock Exchange that seem to support the theoretical predictions, showing a clear diference in behavior between the market behavior before and after the opening of the market.
PB AEFIN : Universidad de Alicante
YR 2003
FD 2003
LK http://hdl.handle.net/10016/7332
UL http://hdl.handle.net/10016/7332
LA eng
NO XI Foro de Finanzas del Nuevo Milenio. Alicante, 13 - 14 de noviembre, 2003.
DS e-Archivo
RD 30 abr. 2024