A comparison of trading and non-trading mechanisms for price discovery
This paper compares trading and non-trading mechanisms for price discovery during the Nasdaq pre-open and examines whether prices discovered though non-trading mechanisms are less efficient or reveal less information than prices discovered through trading. As Nasdaq pre-open trading volume increased, the opening price became more efficient and price discovery shifted from the opening trade to the pre-open. Price discovery shifted from the trading day to the pre-open only for the highest-volume stocks. These results suggest that pre-open trading contributes to the efficiency of the opening price, but that a critical threshold of trading volume is required to increase the amount of information in the opening price.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Medrano, Luis Angel & Vives, Xavier, 2001.
"Strategic Behavior and Price Discovery,"
RAND Journal of Economics,
The RAND Corporation, vol. 32(2), pages 221-248, Summer.
- Medrano, Luis Angel & Vives, Xavier, 1997. "Strategic Behaviour and Price Discovery," CEPR Discussion Papers 1768, C.E.P.R. Discussion Papers.
- Luis Angel Medrano & Xavier Vives, 1998. "Strategic Behavior and Price Discovery," Harvard Institute of Economic Research Working Papers 1825, Harvard - Institute of Economic Research.
- Luis A. Medrano & Xavier Vives, 1997. "Strategic behavior and price discovery," Economics Working Papers 238, Department of Economics and Business, Universitat Pompeu Fabra.
- Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
- Michael J. Barclay & Terrence Hendershott, 2004. "Liquidity Externalities and Adverse Selection: Evidence from Trading after Hours," Journal of Finance, American Finance Association, vol. 59(2), pages 681-710, 04.
- Charles Cao & Eric Ghysels & Frank Hatheway, 2000. "Price Discovery without Trading: Evidence from the Nasdaq Preopening," Journal of Finance, American Finance Association, vol. 55(3), pages 1339-1365, 06.
- French, Kenneth R. & Roll, Richard, 1986. "Stock return variances : The arrival of information and the reaction of traders," Journal of Financial Economics, Elsevier, vol. 17(1), pages 5-26, September.
- Easley, David & O'Hara, Maureen, 1987. "Price, trade size, and information in securities markets," Journal of Financial Economics, Elsevier, vol. 19(1), pages 69-90, September.
- Roger D. Huang, 2002. "The Quality of ECN and Nasdaq Market Maker Quotes," Journal of Finance, American Finance Association, vol. 57(3), pages 1285-1319, 06.
- Ciccotello, Conrad S. & Hatheway, Frank M., 2000. "Indicating Ahead: Best Execution and the NASDAQ Preopening," Journal of Financial Intermediation, Elsevier, vol. 9(2), pages 184-212, April.
- Barclay, Michael J & Litzenberger, Robert H & Warner, Jerold B, 1990. "Private Information, Trading Volume, and Stock-Return Variances," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 233-253.
- Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
- Lawrence R. Glosten & Paul R. Milgrom, 1983. "Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders," Discussion Papers 570, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Terrence Hendershott & Haim Mendelson, 2000. "Crossing Networks and Dealer Markets: Competition and Performance," Journal of Finance, American Finance Association, vol. 55(5), pages 2071-2115, October.
- Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-636, May-June.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
- Michael J. Barclay, 2003. "Price Discovery and Trading After Hours," Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1041-1073.
- Davies, Ryan J., 2003. "The Toronto Stock Exchange preopening session," Journal of Financial Markets, Elsevier, vol. 6(4), pages 491-516, August.
- Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-658.
- Craig, Alastair & Dravid, Ajay & Richardson, Matthew, 1995. "Market efficiency around the clock Some supporting evidence using foreign-based derivatives," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 161-180.
- Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
- Bruno Biais & Pierre Hillion & Chester Spatt, 1999. "Price Discovery and Learning during the Preopening Period in the Paris Bourse," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1218-1248, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:empfin:v:15:y:2008:i:5:p:839-849. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.