Price Discovery Without Trading: Evidence from the NASDAQ Pre-Opening

Posted: 11 Oct 1999

See all articles by Charles Cao

Charles Cao

Pennsylvania State University

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Frank Hatheway

National Association of Securities Dealers, Inc., NASD

Multiple version iconThere are 2 versions of this paper

Date Written: July 21, 1999

Abstract

This paper studies Nasdaq market makers' activities during the one-and-half hour pre-opening period. Price discovery during the pre-opening 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.

JEL Classification: G10, G12

Suggested Citation

Cao, Charles and Ghysels, Eric and Hatheway, Frank, Price Discovery Without Trading: Evidence from the NASDAQ Pre-Opening (July 21, 1999). Available at SSRN: https://ssrn.com/abstract=183409

Charles Cao (Contact Author)

Pennsylvania State University ( email )

Department of Finance
Smeal College of Business
University Park, PA 16802
United States
814-865-7891 (Phone)
814-865-3362 (Fax)

HOME PAGE: http://www.personal.psu.edu/qxc2/cao.html

Eric Ghysels

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

Frank Hatheway

National Association of Securities Dealers, Inc., NASD ( email )

1801 K Street, NW
Washington, DC 20006-1500
United States
202-974-2719 (Phone)

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