In this study, we examine the influence of a preopening call market (CM) session on the subsequent continuous double auction (CDA) trading phase within a combined market structure (CMDA). We propose that the introduction of a CM phase before the CDA could potentially mitigate price volatility during the CDA by facilitating the disclosure of agents' private information through the preopening pricing phase. Our findings reveal a positive relationship between the preopening price and the prices traded during the subsequent phase, alongside a decreased deviation of prices from their fundamental value when high-quality information is available. These results suggest that a well-defined preopening phase has the potential to improve market efficiency.
The impact of a preopening session on subsequent trading: An experimental analysis
Caferra R.;Morone A.
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2024-01-01
Abstract
In this study, we examine the influence of a preopening call market (CM) session on the subsequent continuous double auction (CDA) trading phase within a combined market structure (CMDA). We propose that the introduction of a CM phase before the CDA could potentially mitigate price volatility during the CDA by facilitating the disclosure of agents' private information through the preopening pricing phase. Our findings reveal a positive relationship between the preopening price and the prices traded during the subsequent phase, alongside a decreased deviation of prices from their fundamental value when high-quality information is available. These results suggest that a well-defined preopening phase has the potential to improve market efficiency.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
