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Number preference in Australian stocks

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Author Info
Hristos Doucouliagos

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Abstract

Stock price rallies/declines often terminate at price levels that are interpreted by many as areas of psychological resistance or support, while an alternative interpretation is that they coincide with price clusters. Some of these price levels tend to repeat with a regularity that is inconsistent with mere chance. In this paper, the existence of price clusters and psychological barriers is tested on a sample of 20 Australian stocks. We consider two number sequences, both derived from a base number of 100, as well as integer price levels. It is shown that Australian stock price data are not uniformly distributed and that for the majority of the stocks, price swing highs and lows are associated with certain recurring price levels. Some of the implications for trading and investing are considered.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 1 (January)
Pages: 43-54
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Handle: RePEc:taf:apfiec:v:14:y:2004:i:1:p:43-54

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  1. De Ceuster, Marc J. K. & Dhaene, Geert & Schatteman, Tom, 1998. "On the hypothesis of psychological barriers in stock markets and Benford's Law," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 263-279, September. [Downloadable!] (restricted)
  2. Charles Kahn & George Pennacchi & Ben Sopranzetti, 1999. "Bank Deposit Rate Clustering: Theory and Empirical Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 2185-2214, December. [Downloadable!] (restricted)
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  3. Schindler, Robert M. & Wiman, Alan R., 1989. "Effects of odd pricing on price recall," Journal of Business Research, Elsevier, vol. 19(3), pages 165-177, November. [Downloadable!] (restricted)
  4. Koedijk, Kees G. & Stork, Philip A., 1994. "Should we care? psychological barriers in stock markets," Economics Letters, Elsevier, vol. 44(4), pages 427-432, April. [Downloadable!] (restricted)
  5. Ley, Eduardo & Varian, Hal R, 1994. "Are There Psychological Barriers in the Dow-Jones Index?," Applied Financial Economics, Taylor and Francis Journals, vol. 4(3), pages 217-24, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ng, Travis & Chong, Terence & Xin, Du, 2009. "The Value of Superstitions," MPRA Paper 13575, University Library of Munich, Germany. [Downloadable!]
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