Strategic behavior and price discovery

We analyze the effects of strategic behavior by a large informed trader in a price discovery process used in opening auctions in continuous trading sy stems. It is found that the large informed trader manipulates the market us ing a contrarian strategy to neutralize the effect of the trades of competi tive informed agents. Furthermore, consistent with the empirical evidence a vailable, we find that information revelation accelerates close to the open ing, that the market price approaches but does not converge to the fundamen tal value, and that the expected trading volume displays a U-shaped pattern .