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A comparison of trading and non-trading mechanisms for price discovery

  • Barclay, Michael J.
  • Hendershott, Terrence
Registered author(s):

    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.

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    File URL: http://www.sciencedirect.com/science/article/B6VFG-4S32NK0-1/2/84a8b88956ae214ab9e38fa2c50e4763
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    Article provided by Elsevier in its journal Journal of Empirical Finance.

    Volume (Year): 15 (2008)
    Issue (Month): 5 (December)
    Pages: 839-849

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    Handle: RePEc:eee:empfin:v:15:y:2008:i:5:p:839-849
    Contact details of provider: Web page: http://www.elsevier.com/locate/jempfin

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