The Impact of a Pre-Opening Session on Subsequent Trading: an Experimental Analysis

Caferra, Rocco and Morone, Andrea and Nuzzo, Simone (2019): The Impact of a Pre-Opening Session on Subsequent Trading: an Experimental Analysis.

Abstract

The purpose of this paper is to examine the market structure at the opening and its influence on subsequent trading. In particular, we measure the market effciency of a pre-opening call market (CM) followed by a continuous double auction (CDA) focusing on the role of information. Aimed by Weigelt (1991), Theissen (2000) and Hinterleitner at al. (2015) we check whether the introduction of a call market leads to underreaction among agents' bids, improving market efficiency. Results evidence a positive correlation between pre-opening price and subsequent prices traded and a lower price-dividend deviation in case of high quality information.

• Item Type: MPRA Paper
• Language: English
• Keywords: Experimental Asset Market; Market Efficiency; Double Auction; Clearing House; Pre-Opening
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments

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