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Price Discovery Across the Rhine

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  • Biais, Bruno
  • Martinez, Isabelle

Abstract

This 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 Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2878.

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Date of creation: Jul 2001
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Handle: RePEc:cpr:ceprdp:2878

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Related research

Keywords: information assymeteries; international financial markets integration; market microstructure;

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Cited by:
  1. Foucault, Thierry & Gehrig, Thomas, 2008. "Stock price informativeness, cross-listings, and investment decisions," Journal of Financial Economics, Elsevier, vol. 88(1), pages 146-168, April.
  2. 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.
  3. Idier, J., 2006. "Stock exchanges industry consolidation and shock transmission," Working papers 159, Banque de France.

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