Are there Psychological Barriers in Asian Stock Markets?

J˙lio Lob„o () and Margarida Couto
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J˙lio Lob„o: School of Economics and Management, University of Porto, Rua Dr. Roberto Frias, 4200-464, Porto ñ Portugal
Margarida Couto: School of Economics and Management, University of Porto, Rua Dr. Roberto Frias, 4200-464, Porto ñ Portugal

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2019, vol. 15, issue 1, 83-106

Abstract: We examine six major Asian stock markets for indication of psychological barriers at round numbers. We test for uniformity in the trailing digits of the indices and use regression and generalized autoregressive conditional heteroskedasticity (GARCH) analysis to assess the differential impact of being above or below a possible barrier. The strongest indication of barriers was found in the markets of South Korea and Taiwan. There is mild evidence of barriers in Japan and Hong Kong and the stock markets of Singapore and China exhibit only weak signs of psychological barriers. These findings challenge the notion that Asian markets are efficient and support the claim that technical analysis strategies can be useful in some of these markets.

Keywords: Asian markets; psychological barriers; stock market indices; market psychology; round numbers (search for similar items in EconPapers)
Date: 2019
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