Articles

Price Discovery and Learning during the Preopening Period in the Paris Bourse

B. BIAIS, P. HILLION, C. SPATT

Journal of Political Economy

décembre 1999, vol. 107, n°6, pp.1218-1248

Départements : Finance

http://www.journals.uchicago.edu/doi/abs/10.1086/250095


Before the opening of the Paris Bourse, traders place orders and indicative prices are set. This offers a laboratory to study empirically the tâtonnement process through which markets discover equilibrium prices. Since preopening orders can be revised or canceled before the opening, indicative prices could be noise. We test this against the hypothesis that preopening prices reflect learning.Early in the preopening the noise hypothesis is not rejected. As the opening gets closer, the informational content and efficiency of prices increase and the learning hypothesis is not rejected. We also propose a GMM‐based estimate of the speed of learning


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