A high-frequency analysis of price resolution and pricing barriers in equities on the adoption of a new currency

Christos Alexakis, Mark Cummins, Michael Dowling, Vasileios Pappas

Research output: Contribution to journalArticle

Abstract

We use ultra high frequency (trade by trade) data to demonstrate that equity price clustering and pricing predictability around psychologically important prices in Greece switches away from drachma-focused with the introduction of the euro, but does not immediately switch to euroclustering. The change in trader price focus around the euro introduction addresses an open debate in the clustering literature on whether the presence of clustering is a bias related to the current prices or anchoring to past prices. Our findings of a decline in drachma clustering, but lack of switch to euro effects supports the case for clustering being a trading feature that is slow to transfer to new pricing regimes. A key advantage of the ultra high frequency dataset is we are
also able to demonstrate the presence of psychological pricing barriers related to each currency that are not detectable in daily data.
LanguageEnglish
Pages3949-3965
Number of pages17
JournalApplied Economics
Volume50
Issue number36
Early online date23 Jan 2018
DOIs
StatusPublished - 2018

Fingerprint

Clustering
Pricing
Currency
Equity
Frequency analysis
Greece
Price clustering
Predictability
Anchoring
Equity prices
Psychological
Traders

Cite this

A high-frequency analysis of price resolution and pricing barriers in equities on the adoption of a new currency. / Alexakis, Christos; Cummins, Mark; Dowling, Michael; Pappas, Vasileios.

In: Applied Economics, Vol. 50, No. 36, 2018, p. 3949-3965.

Research output: Contribution to journalArticle

Alexakis, Christos ; Cummins, Mark ; Dowling, Michael ; Pappas, Vasileios. / A high-frequency analysis of price resolution and pricing barriers in equities on the adoption of a new currency. In: Applied Economics. 2018 ; Vol. 50, No. 36. pp. 3949-3965.
@article{a9a5388742ad4ddb9d107389ddd667bc,
title = "A high-frequency analysis of price resolution and pricing barriers in equities on the adoption of a new currency",
abstract = "We use ultra high frequency (trade by trade) data to demonstrate that equity price clustering and pricing predictability around psychologically important prices in Greece switches away from drachma-focused with the introduction of the euro, but does not immediately switch to euroclustering. The change in trader price focus around the euro introduction addresses an open debate in the clustering literature on whether the presence of clustering is a bias related to the current prices or anchoring to past prices. Our findings of a decline in drachma clustering, but lack of switch to euro effects supports the case for clustering being a trading feature that is slow to transfer to new pricing regimes. A key advantage of the ultra high frequency dataset is we arealso able to demonstrate the presence of psychological pricing barriers related to each currency that are not detectable in daily data.",
author = "Christos Alexakis and Mark Cummins and Michael Dowling and Vasileios Pappas",
year = "2018",
doi = "10.1080/00036846.2018.1430347",
language = "English",
volume = "50",
pages = "3949--3965",
journal = "Applied Economics",
issn = "0003-6846",
publisher = "Routledge",
number = "36",

}

TY - JOUR

T1 - A high-frequency analysis of price resolution and pricing barriers in equities on the adoption of a new currency

AU - Alexakis, Christos

AU - Cummins, Mark

AU - Dowling, Michael

AU - Pappas, Vasileios

PY - 2018

Y1 - 2018

N2 - We use ultra high frequency (trade by trade) data to demonstrate that equity price clustering and pricing predictability around psychologically important prices in Greece switches away from drachma-focused with the introduction of the euro, but does not immediately switch to euroclustering. The change in trader price focus around the euro introduction addresses an open debate in the clustering literature on whether the presence of clustering is a bias related to the current prices or anchoring to past prices. Our findings of a decline in drachma clustering, but lack of switch to euro effects supports the case for clustering being a trading feature that is slow to transfer to new pricing regimes. A key advantage of the ultra high frequency dataset is we arealso able to demonstrate the presence of psychological pricing barriers related to each currency that are not detectable in daily data.

AB - We use ultra high frequency (trade by trade) data to demonstrate that equity price clustering and pricing predictability around psychologically important prices in Greece switches away from drachma-focused with the introduction of the euro, but does not immediately switch to euroclustering. The change in trader price focus around the euro introduction addresses an open debate in the clustering literature on whether the presence of clustering is a bias related to the current prices or anchoring to past prices. Our findings of a decline in drachma clustering, but lack of switch to euro effects supports the case for clustering being a trading feature that is slow to transfer to new pricing regimes. A key advantage of the ultra high frequency dataset is we arealso able to demonstrate the presence of psychological pricing barriers related to each currency that are not detectable in daily data.

U2 - 10.1080/00036846.2018.1430347

DO - 10.1080/00036846.2018.1430347

M3 - Article

VL - 50

SP - 3949

EP - 3965

JO - Applied Economics

T2 - Applied Economics

JF - Applied Economics

SN - 0003-6846

IS - 36

ER -