Exploring the Nordic numbers: an analysis of price clustering in Scandinavian stocks

Júlio Lobão, Luís Pacheco and Daniel Carvalho

Review of Behavioral Finance, 2024, vol. 16, issue 6, 1012-1028

Abstract: Purpose - This paper investigates share price clustering and its determinants across Nasdaq Stockholm, Copenhagen, Helsinki, and Iceland. Design/methodology/approach - This paper investigates share price clustering and its determinants across Nasdaq Stockholm, Copenhagen, Helsinki, and Iceland. Univariate analysis confirms widespread clustering, notably favouring closing prices ending in zero. Multivariate analysis explores the impact of firm size, price level, volatility, and turnover on clustering. Findings - Univariate analysis confirms widespread clustering, notably favouring closing prices ending in zero. Multivariate analysis explores the impact of firm size, price level, volatility, and turnover on clustering. Results reveal pervasive clustering, strengthening with higher prices and turnover but weakening with larger trade volumes, firm size, and smaller tick sizes. These empirical findings support the theoretical expectations of price negotiation and resolution hypotheses. Practical implications - The observed clustering presents an opportunity for investors to potentially capitalize on this market anomaly and achieve supra-normal returns. Originality/value - Price clustering, the phenomenon where certain price levels are traded more frequently, challenges the efficient market hypothesis and has been extensively studied in financial markets. However, the Scandinavian stock markets, particularly those in the Nasdaq Nordic Exchange, remain unexplored in this context.

Keywords: Price clustering; Behavioural finance; Scandinavia; Nasdaq nordic exchange; Efficient market hypothesis; Negotiation hypothesis; Resolution hypothesis; G12; G14; G15; G40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-01-2024-0007

DOI: 10.1108/RBF-01-2024-0007

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