Price Discovery Across the Rhine
AbstractThis Paper studies the formation of opening prices for German and French stocks, simultaneously traded in Frankfurt and Paris. We analyse theoretically the case where investors and traders based in the same country as the firm have better information on its value than foreign traders. Our model implies that prices set on the domestic market should be informationally more e±cient than prices set on the foreign market. For German stocks, our empirical results are consistent with theory. The informational e±ciency of French stock prices is comparable in the two markets when the Frankfurt specialist can observe Paris preopening prices before opening the market.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2878.
Date of creation: Jul 2001
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Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F30 - International Economics - - International Finance - - - General
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- Foucault, Thierry & Gehrig, Thomas, 2006.
"Stock Price Informativeness, Cross-Listings and Investment Decisions,"
CEPR Discussion Papers
5722, C.E.P.R. Discussion Papers.
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- Foucault, Thierry & Gehrig, Thomas, 2006. "Stock price informativeness, cross-listings and investment decisions," Les Cahiers de Recherche 840, HEC Paris.
- Idier, J., 2006. "Stock exchanges industry consolidation and shock transmission," Working papers 159, Banque de France.
- Tsiakas, Ilias, 2008. "Overnight information and stochastic volatility: A study of European and US stock exchanges," Journal of Banking & Finance, Elsevier, vol. 32(2), pages 251-268, February.
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