Price discovery without trading: Evidence from the Nasdaq preopening

Charles Cao, Eric Ghysels, Frank Hatheway

Research output: Contribution to journalArticlepeer-review

127 Scopus citations


This paper studies Nasdaq market makers' activities during the one and one-half hour preopening period. Price discovery during the preopening is conducted via price signaling as opposed to the auction used to open the NYSE or the continuous market used during trading. In the absence of trades, Nasdaq dealers use crossed and locked inside quotes to signal to other market makers which direction the price should move. Furthermore, we find evidence of price leadership among market makers that bears little resemblance to their IPO/SEO lead underwriter participation.

Original languageEnglish (US)
Pages (from-to)1339-1365
Number of pages27
JournalJournal of Finance
Issue number3
StatePublished - Jun 2000

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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