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Nominal Stock Price Anchors: A Global Phenomenon?

71 Pages Posted: 25 Mar 2015 Last revised: 17 Feb 2017

Kee-Hong Bae

York University - Schulich School of Business

Jisok Kang

Cambridge Endowment for Research in Finance, University of Cambridge

S. Ghon Rhee

University of Hawaii - Shidler College of Business; University of Hawaii - Department of Financial Economics and Institutions

Date Written: November 18, 2016

Abstract

Weld, Michaely, Thaler, and Benartzi (2009) find that the average nominal stock price on the New York Stock Exchange and the American Stock Exchange has been approximately $25 since the Great Depression. They report that this “nominal price fixation is primarily a U.S. or North American phenomenon.” Using a larger data set from 38 countries, we show that nominal prices of most stocks tend to revert to their initial public offer (IPO) prices. IPO prices are natural anchors because they are the first public prices observed by investors. We demonstrate that corporate actions maintain these nominal stock price anchors.

Keywords: anchoring, norms, nominal share price

JEL Classification: G02, G14, G15

Suggested Citation

Bae, Kee-Hong and Kang, Jisok and Rhee, S. Ghon, Nominal Stock Price Anchors: A Global Phenomenon? (November 18, 2016). Available at SSRN: https://ssrn.com/abstract=2583954 or http://dx.doi.org/10.2139/ssrn.2583954

Kee-Hong Bae

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-2100 ext) 20248 (Phone)
416-736-5687 (Fax)

Jisok Kang (Contact Author)

Cambridge Endowment for Research in Finance, University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44(0)1223 764227 (Phone)

HOME PAGE: http:// www.cerf.cam.ac.uk

S. Ghon Rhee

University of Hawaii - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii - Department of Financial Economics and Institutions ( email )

United States

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