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Information Content of Price Discovery Process in Preopening of the Tehran Stock Exchange

Safari, Sina | 2025

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 57941 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Ebrahimnejad, Ali
  7. Abstract:
  8. As an initial step in understanding the issue of disputed spoofing orders in the Tehran Stock Exchange (TSE), this paper empirically analyzes the limit order book data of the market from 2010 to 2024. The findings demonstrate—consistent with the existing literature—that the pre-opening phase of the TSE contains valuable informational content. Notably, the study identifies evidence of learning over time during the pre-opening phase, accompanied by a significant increase in informational content as the market approaches its opening. These results align with both theoretical and empirical studies in this domai. The analysis further reveals that factors such as company size play a crucial role in the price discovery process. Smaller companies, which typically face lower liquidity and greater information asymmetry, exhibit more challenges in price discovery and generally have orders with less information content compared to larger companies. Interestingly, there are periods where smaller companies display higher informational content than larger ones, deviating from prior studies. However, this discrepancy remains unexplained in the current analysis. Additionally, the calculated coefficients for informational content during the pre-opening phase show high volatility across different periods, and the lack of consistency in the coefficient differences between small and large companies raises doubts about the assumption of parallel trends. As a result, no causal relationship has been established between changes in the TSE's microstructure—such as the shortening of the pre-opening duration or the prohibition of order cancellations in the final five minutes—and the price discovery process. Nevertheless, certain observable patterns emerge, such as a marked increase in order cancellations near 8:55 AM following these structural changes
  9. Keywords:
  10. Information Content ; Price Discovery ; Price Manipulation ; Market Manipulation ; Market Pre-Opening ; Market Microstructure ; Stock Market

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