A high-frequency analysis of price resolution and pricing
barriers in equities on the adoption of a new currency
Alexakis, Christos, Cummins, MarkORCID: 0000-0002-3539-8843, Dowling, MichaelORCID: 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)
Refereed:
Yes
Uncontrolled Keywords:
clustering; psychological barriers; euro introduction; transaction data