Abstract

http://ssrn.com/abstract=278164
 
 

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Price Discovery Across the Rhine


Bruno Biais


Centre for Economic Policy Research (CEPR)

Isabelle Martinez


University of Toulouse - Paul Sabatier; LGC

July 2001

AFA 2002 Atlanta Meetings; CEPR Disc. Paper No. 2878

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 efficient than prices set on the foreign market. For German stocks, our empirical results are consistent with theory. The informational efficiency of French stock prices is comparable in the two markets when the Frankfurt specialist can observe Paris preopening prices before opening the market.

Number of Pages in PDF File: 35

Keywords: International financial markets integration, information assymeteries, market microstructure

JEL Classification: F12, F21, F30

working papers series


Date posted: August 15, 2001  

Suggested Citation

Biais, Bruno and Martinez, Isabelle, Price Discovery Across the Rhine (July 2001). AFA 2002 Atlanta Meetings; CEPR Disc. Paper No. 2878. Available at SSRN: http://ssrn.com/abstract=278164

Contact Information

Bruno Biais (Contact Author)
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Isabelle Martinez
University of Toulouse - Paul Sabatier; LGC ( email )
118 Route de Narbonne
Toulouse cedex 9, F-31062
France
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Citations:  3
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