Another look at the price clustering behavior: evidence from the Muscat stock exchange

Tarek Chebbi, Hazem Migdady, Waleed Hmedat and Maha Shehadeh

Review of Behavioral Finance, 2024, vol. 16, issue 5, 773-791

Abstract: Purpose - The price clustering behavior is becoming a core part of the market efficiency theory especially with the development of trading strategies and the occurrence of major and unprecedented shocks which have led to severe inquiry regarding asset price dynamics and their distribution. However, research on emerging stock market is scant. The study contributes to the literature on price clustering by investigating an active emerging stock market, the Muscat stock market one of the Arabian Gulf Markets. Design/methodology/approach - This research adopts the artificial intelligence technique and other statistical estimation procedure in understanding the price clustering patterns in Muscat stock market and their main determinants. Findings - The findings reveal that stock prices are marked by clustering behavior as commonly highlighted in the previous studies. However, we found strong evidence of price preferences to cluster on numbers closer to zero than to one. We also show that the nature of firm’s activity matters for price clustering behavior. In addition, firms with traded bonds in Oman market experienced a substantial less stock price clustering than other firms. Clustered stock prices are more likely to have higher prices and higher volatility of price. Finally, clustering raised when the market became highly uncertain during the Covid-19 crisis especially for the financial firms. Originality/value - This study provides novel results on price clustering literature especially for an active emerging market and during the Covid-19 pandemic crisis.

Keywords: Clustering price; MSM30; Covid-19; Enhanced Fuzzy K-Means clustering; Round prices; C58; D53; G12; G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-02-2023-0053

DOI: 10.1108/RBF-02-2023-0053

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