Abstract
Many stock exchanges implement advanced procedures toward preventing
manipulative orders from distorting informative price discovery during
preopening sessions. Often, such sessions involve both the stock and options
markets, with book-based indicative stock prices and traded index options,
whose underlying is the indicative index. Significant differences between the
options-implied and the indicative indexes may point at either differences in
informational efficiencies, or that one of the markets is manipulated. Using a
unique dataset, we explore informational (prices) and transactional (liquidity)
efficiencies. We find significant price and illiquidity patterns similar to those
predicted by theoretical models of manipulation, but also informational
inefficiencies
manipulative orders from distorting informative price discovery during
preopening sessions. Often, such sessions involve both the stock and options
markets, with book-based indicative stock prices and traded index options,
whose underlying is the indicative index. Significant differences between the
options-implied and the indicative indexes may point at either differences in
informational efficiencies, or that one of the markets is manipulated. Using a
unique dataset, we explore informational (prices) and transactional (liquidity)
efficiencies. We find significant price and illiquidity patterns similar to those
predicted by theoretical models of manipulation, but also informational
inefficiencies
| Original language | English GB |
|---|---|
| Publisher | SSRN |
| Number of pages | 41 |
| State | Published - 15 May 2014 |