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Price Discovery without Trading: Evidence from the Nasdaq Preopening

  • Charles Cao

    (Penn State University,)

  • Eric Ghysels

    (CIRANO and Penn State University)

  • Frank Hatheway

    (Penn State University,)

This paper studies Nasdaq market makers' activities during the one and one-half hour preopening period. Price discovery during the preopening is conducted via price signaling as opposed to the auction used to open the NYSE or the continuous market used during trading. In the absence of trades, Nasdaq dealers use crossed and locked inside quotes to signal to other market makers which direction the price should move. Furthermore, we find evidence of price leadership among market makers that bears little resemblance to their IPO\SEO lead underwriter participation. Copyright The American Finance Association 2000.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 55 (2000)
Issue (Month): 3 (06)
Pages: 1339-1365

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Handle: RePEc:bla:jfinan:v:55:y:2000:i:3:p:1339-1365
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