Price Discovery Across the Rhine

Bruno Biais and Isabelle Martinez

No 2878, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper studies the formation of opening prices for German and French stocks, simultaneously traded in Frankfurt and Paris. We analyse theoretically the case where investors and traders based in the same country as the firm have better information on its value than foreign traders. Our model implies that prices set on the domestic market should be informationally more e±cient than prices set on the foreign market. For German stocks, our empirical results are consistent with theory. The informational e±ciency of French stock prices is comparable in the two markets when the Frankfurt specialist can observe Paris preopening prices before opening the market.

Keywords: International financial markets integration; Information assymeteries; Market microstructure (search for similar items in EconPapers)
JEL-codes: F12 F21 F30 (search for similar items in EconPapers)
Date: 2001-07
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Citations: View citations in EconPapers (1)

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Journal Article: Price Discovery across the Rhine (2004)
Journal Article: Price Discovery across the Rhine (2004)
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