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

Alexakis, Christos, Cummins, Mark orcid logoORCID: 0000-0002-3539-8843, Dowling, Michael orcid logoORCID: 0000-0002-8093-9039 and Pappas, Vasileios (2018) A high-frequency analysis of price resolution and pricing barriers in equities on the adoption of a new currency. Applied Economics, 50 (36). pp. 3949-3965. ISSN 0003-6846

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 euro-clustering. 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 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.
Item Type:Article (Published)
Uncontrolled Keywords:clustering; psychological barriers; euro introduction; transaction data
Subjects:Business > Finance
DCU Faculties and Centres:DCU Faculties and Schools > DCU Business School
Publisher:Taylor & Francis
Official URL:http://dx.doi.org/10.1080/00036846.2018.1430347
Copyright Information:© 2018 Taylor & Francis
Use License:This item is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 3.0 License. View License
ID Code:24125
Deposited On:14 Jan 2020 16:16 by Thomas Murtagh . Last Modified 21 Feb 2022 13:24

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