Order-book transparency and pre-trading period price discovery
(English)Manuscript (preprint) (Other academic)
I investigate the importance of the pre-trading period and opening call auction on the price discovery process, and how this process is affected by order-book transparency during the pre-trading period. Results show that the pre-trading period is an integral part of the trading day for the studied stocks since a large part of the day’s price discovery occurs by the conclusion of this period. The visibility of the orderbook and no possible presence of iceberg orders during the pre-trading periodhave a negative impact on the level of price discovery. Decreasing transparency (in either of these two aspects or jointly) is shown to have a positive effecton the amount of pre-trading period price discovery. Finally a change in the visibility of the pre-trading order book in one of the studied markets confirms that reduction in visibility leads to higher price discovery during the pre-trading period.
order book, transparency, price discovery, pre-opening period, frontier stock market
IdentifiersURN: urn:nbn:se:su:diva-109171OAI: oai:DiVA.org:su-109171DiVA: diva2:763341