Comparison of the Stock Price Clustering of stocks which are traded in the US and Germany—Is XETRA more efficient than the NYSE?
AbstractWe analyze intraday trades of German stocks (Daimler Chrysler and SAP) that are traded simultaneously at the German stock market XETRA and the New York Stock Exchange (NYSE). At first glance, the stock price clustering seems to be less pronounced at the NYSE. But after converting Euro-prices into Dollar-prices, we obtain the result that the clustering is stronger at the NYSE indicating that XETRA is more efficient with respect to this measure. This difference in the clustering at the different stock markets should not be observable if the no-arbitrage condition would hold. We also discuss several explanations, like ease of negotiation, convenience and rounding, attraction, odd pricing, and aspiration level for stock price clustering. As a result we see that no model is able to capture all of our empirical observations.
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Bibliographic InfoPaper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 09016.
Length: 21 pages
Date of creation: May 2009
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behavioral finance; market microstructure; stock price clustering;
Find related papers by JEL classification:
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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