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Strategic behaviour and indicative price diffusion in Paris Stock Exchange auctions

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  • Damien Challet

Abstract

We report statistical regularities of the opening and closing auctions of French equities, focusing on the diffusive properties of the indicative auction price. Two mechanisms are at play as the auction end time nears: the typical price change magnitude decreases, favoring underdiffusion, while the rate of these events increases, potentially leading to overdiffusion. A third mechanism, caused by the strategic behavior of traders, is needed to produce nearly diffusive prices: waiting to submit buy orders until sell orders have decreased the indicative price and vice-versa.

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  • Damien Challet, 2018. "Strategic behaviour and indicative price diffusion in Paris Stock Exchange auctions," Papers 1807.00573, arXiv.org.
    • Handle: RePEc:arx:papers:1807.00573
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    References listed on IDEAS

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    1. Selma Boussetta & Laurence Lescourret & Sophie Moinas, 2017. "Pre-opening periods in fragmented markets," Working Papers hal-02156170, HAL.
    2. Selma Boussetta, 2017. "The role of pre-opening mechanisms in fragmented markets," Post-Print hal-02156145, HAL.
    3. Bellia, Mario & Pelizzon, Loriana & Subrahmanyam, Marti G. & Uno, Jun & Yuferova, Darya, 2017. "Low-latency trading and price discovery: Evidence from the Tokyo Stock Exchange in the pre-opening and opening periods," SAFE Working Paper Series 144, Leibniz Institute for Financial Research SAFE, revised 2017.
    4. Damien Challet & Nikita Gourianov, 2018. "Dynamical regularities of US equities opening and closing auctions," Papers 1802.01921, arXiv.org, revised Oct 2018.
    5. Damien Challet, 2018. "Strategic behaviour and indicative price diffusion in Paris Stock Exchange auctions," Papers 1807.00573, arXiv.org.
    6. Pagano, Michael S. & Schwartz, Robert A., 2003. "A closing call's impact on market quality at Euronext Paris," Journal of Financial Economics, Elsevier, vol. 68(3), pages 439-484, June.
    7. Damien Challet & Nikita Gourianov, 2018. "Dynamical regularities of US equities opening and closing auctions," Papers 1802.01921, arXiv.org, revised Oct 2018.
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    Cited by:

    1. Damien Challet & Nikita Gourianov, 2018. "Dynamical regularities of US equities opening and closing auctions," Papers 1802.01921, arXiv.org, revised Oct 2018.

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