Faculty & Research

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 im-mediately 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 posi-tively related to the extent of analyst coverage. Most importantly, there is a reliable relation be-tween 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.