Price discovery and learning during the preopening period in the Paris bourse

Before the opening of the Paris Bourse, traders place orders and indicative prices are set. This offers a laboratory to study empirically the tatonnement process through which markets discover equilibrium prices. Since preopening orders can be revised or canceled before the opening, indicative prices could be noise. We test this against the hypothesis that preopening prices reflect learning. Early in the preopening the noise hypothesis is not rejected. As the opening gets closer, the informational content and efficiency of prices increase and the learning hypothesis is not rejected. We also propose a GMM-based estimate of the speed of learning.