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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- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- 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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