Price Discovery without Trading: Evidence from the Nasdaq Preopening

Charles Cao, Eric Ghysels and Frank Hatheway

Journal of Finance, 2000, vol. 55, issue 3, 1339-1365

Abstract: 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.

Date: 2000
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https://doi.org/10.1111/0022-1082.00249

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:55:y:2000:i:3:p:1339-1365

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