Mind the Gap: Psychological Barriers in Gold and Silver Prices
13 Pages Posted: 17 Feb 2016
Date Written: February 17, 2016
This study tests the popular claim that psychological barriers exist around key reference points in prices for gold and silver, namely around numbers ending in 0 (e.g. $450) and 00 (e.g. $200). Initial observations and tests show that the price of gold fixes less frequently on values ending in 0 and 00, suggesting the existence of barriers at these levels which manifest as gaps or fewer observations in the frequency distributions at these points. Subsequent statistical tests find support for the existence of barriers at numbers ending in 0 and 00 in the price of gold. Conversely, while initial observations and tests suggest that the silver price is not perfectly uniformly distributed, there is no statistically significant evidence to support that barriers exist at either 0 or 00 for this metal.
Keywords: Gold, Silver, Psychological Barriers, Behavioural
JEL Classification: C12, C22, G12, G14, G15
Suggested Citation: Suggested Citation