A note on price noises and their correction process: Evidence from two equal-payoff government bonds

B. Lauterbach, A. Wohl

Research output: Contribution to journalArticlepeer-review

Abstract

The study offers the most direct evidence to date on price noises in call auctions and their correction. We examine a unique sample of two identical securities (two equal-payoff Israeli government bonds) that were traded on separate yet almost simultaneous auctions on the Tel-Aviv Stock Exchange (TASE). The prices of the bonds were equal on average. However, on most of the sample days there were price differences between the bonds. Various estimates suggest that the price noise in one bond is practically uncorrelated with that of the other, and both disappear by the end of the next-day auction.

Original languageEnglish
Pages (from-to)597-612
Number of pages16
JournalJournal of Banking and Finance
Volume25
Issue number3
DOIs
StatePublished - Mar 2001
Externally publishedYes

Keywords

  • G14
  • Market efficiency
  • Market microstructure
  • Price correction
  • Price noise

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