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Price Clustering on the Tokyo Stock Exchange

Author

Listed:
  • Aslı Aşçıoğlu
  • Carole Comerton‐Forde
  • Thomas H. McInish

Abstract

This paper examines price clustering on the Tokyo Stock Exchange (TSE). Regardless of tick and lot size, prices ending in zero and five are the most popular. The TSE has no market makers or direct negotiation between traders; therefore, clustering is not explained by collusion or negotiation. Our evidence supports the attraction hypothesis. Clustering also extends to order book depth. There is evidence of strategic trading behavior as traders place orders one price tick better than zero and five to avoid queuing orders at prices ending in these digits. Strategic trading behavior declined and clustering increased when the market became anonymous.

Suggested Citation

  • Aslı Aşçıoğlu & Carole Comerton‐Forde & Thomas H. McInish, 2007. "Price Clustering on the Tokyo Stock Exchange," The Financial Review, Eastern Finance Association, vol. 42(2), pages 289-301, May.
  • Handle: RePEc:bla:finrev:v:42:y:2007:i:2:p:289-301
    DOI: 10.1111/j.1540-6288.2007.00172.x
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    File URL: https://doi.org/10.1111/j.1540-6288.2007.00172.x
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    Cited by:

    1. Mishra, Ajay Kumar & Tripathy, Trilochan, 2018. "Price and trade size clustering: Evidence from the national stock exchange of India," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 63-72.
    2. Narayan, Paresh Kumar & Smyth, Russell, 2013. "Has political instability contributed to price clustering on Fiji's stock market?," Journal of Asian Economics, Elsevier, vol. 28(C), pages 125-130.
    3. Yizhou Bai & Zhiyu Guo, 2019. "An Empirical Investigation to the “Skew” Phenomenon in Stock Index Markets: Evidence from the Nikkei 225 and Others," Sustainability, MDPI, Open Access Journal, vol. 11(24), pages 1-1, December.
    4. Das, Sougata & Kadapakkam, Palani-Rajan, 2020. "Machine over Mind? Stock price clustering in the era of algorithmic trading," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    5. Jeon, Jin Q. & Lee, Cheolwoo, 2015. "A new measure for heated negotiation in the IPO syndicate," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 278-304.
    6. Urquhart, Andrew, 2017. "Price clustering in Bitcoin," Economics Letters, Elsevier, vol. 159(C), pages 145-148.
    7. Ya-Hui Wang & Chien-Chih Lai, 2015. "The Effect of Limit Order Book Information on Investors with Different Risk Attitudes," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(1), pages 113-120.
    8. Jörg Rieger & Kirsten Rüchardt & Bodo Vogt, 2011. "Comparing High Frequency Data of Stocks that are Traded Simultaneously in the US and Germany: Simulated Versus Empirical Data," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 1(2), pages 126-142, December.
    9. repec:ipg:wpaper:2014-405 is not listed on IDEAS
    10. ap Gwilym, Owain & Verousis, Thanos, 2010. "Price clustering and underpricing in the IPO aftermarket," International Review of Financial Analysis, Elsevier, vol. 19(2), pages 89-97, March.
    11. Kirsten Rüchardt & Bodo Vogt, 2009. "Comparison of the Stock Price Clustering of stocks which are traded in the US and Germany—Is XETRA more efficient than the NYSE?," FEMM Working Papers 09016, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    12. Rashid AMIN & Habib AHMAD, 2013. "Does Investor Attention Matter�S?," Journal of Public Administration, Finance and Law, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 4(4), pages 111-125, December.
    13. Ryan L. Davis & Stephen N. Jurich & Brian S. Roseman & Ethan D. Watson, 2018. "Short-Sale Restrictions and Price Clustering: Evidence from SEC Rule 201," Journal of Financial Services Research, Springer;Western Finance Association, vol. 54(3), pages 345-367, December.
    14. Hao-Chen Liu, 2011. "Timing of price clustering and trader behavior in the foreign exchange market: evidence from Taiwan," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 35(2), pages 198-210, April.

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