Foreign Investors, Private Information, and Price Discovery
We examine the relation between intra-day price discovery and proxies for financial openness and investor accessibility using a sample of intra-day price and quote data of 1,504 stocks from 23 emerging markets. We measure price discovery by weighted price contribution across seg-ments of the trading day. There is a reliable relation between price discovery in early trading and direct foreign ownership, controlling for other factors. A better legal environment is significantly related to the speed of price discovery. Foreign ownership and a better legal environment also lead to more informative prices at the opening of trading.
Jun Cai, Richard Y.K. Ho, Robert Korajczyk, Zheng Zhang
Cai, Jun, Richard Y.K. Ho, Robert Korajczyk, and Zheng Zhang. 2018. Foreign Investors, Private Information, and Price Discovery.