Behavioral Influences in Non-Ferrous Metals Prices

41 Pages Posted: 16 Nov 2014

See all articles by Mark Cummins

Mark Cummins

Dublin City University Business School

Michael M. Dowling

ESC Rennes School of Business

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; University of Economics Ho Chi Minh City

Date Written: November 14, 2014

Abstract

Recent research has identified the presence of behavioral influences on traders in predominantly professionally traded markets such as oil, gold, and foreign exchange. Previous research had largely confined behavioral-based investigations to equity markets due to an assumption that noise traders would drive any influence and these traders were mainly absent from the professionally traded markets. This paper extends this research to the non-ferrous metals markets and demonstrates similar influences on prices. It is shown that psychological price barriers, where there is predictable trading patterns around psychologically important price points, are important. Specifically, lead, zinc, and aluminium alloy, show anomalous price reactions in the days particularly following a breach of a $1,000 price point. There is also evidence presented of negative price clustering before key price barriers. Subperiod tests further indicate that the relevant psychological price point is dependent on average prices. Recognizing the multiple hypothesis testing nature of the study, generalized Bonferroni corrections are implemented to provide a robust control for the possibility of data mining. This represents a first investigation of behavioral influences in non-ferrous metals prices, and suggests these markets are not immune to trader biases influencing the setting of prices.

Keywords: psychological barriers; clustering; non-ferrous metals

JEL Classification: G13, G14, L61

Suggested Citation

Cummins, Mark and Dowling, Michael M. and Lucey, Brian M., Behavioral Influences in Non-Ferrous Metals Prices (November 14, 2014). Available at SSRN: https://ssrn.com/abstract=2524439 or http://dx.doi.org/10.2139/ssrn.2524439

Mark Cummins

Dublin City University Business School ( email )

Dublin 9
Ireland

Michael M. Dowling

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000
France

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

University of Economics Ho Chi Minh City ( email )

59C Nguyen D├Čnh Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

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