Events

Economics Seminar

Authors:

• Jun CAI
  City University of Hong Kong

• Zheng Zhang
  Pe-king University

• Richard Y. K. Ho
  City University of Hong Kong

• Robert Korajczyk
  Northwestern University

This paper examines the relation between intraday price discovery and proxies for financial openness or investor accessibility for a large cross-section of 23 emerging markets. Our sample covers 1,504 stocks over a period of eight months, from 2006 to 2007. We find price discovery, as measured by weighted price contribution, to be most important in early trading sessions immediately after the market opens. Our cross-sectional analysis suggests that price discovery in early trading is negatively related to the level of the bid-ask spread and return volatility, and positively related to the extent of analyst coverage. Most importantly, there is a reliable relation between early price discovery and direct foreign ownership in the underlying stocks. Greater price discovery early in the day is affiliated with a more significant presence of foreign investors in the home markets.