Price Discovery in the Greek Preopening

Abstract

In this paper the role of the preopening period in the price discovery process is analyzed, using for the first time a set of continuous intra-daily transactions, orders and quotes data from the Athens Stock Exchange, for a sample of 20 actively traded stocks making up the FTSE/ASE-20 index. The information content of the opening price and indicative clearing prices is explored by means of predictive regressions (Biais et al., 1999). Results show that: a) opening price is an unbiased predictor of fair value, b) indicative prices computed over all forms of orders follow a U-shaped process towards the latter, revealing an informational deterioration in the mid-preopening, c) limit clearing prices computed solely over limit orders predict fair value better than indicative prices, indicating a higher informational content of limit orders (Madhavan and Panchapagan, 2000). EFM classification: 360, JEL classification: G14