Psychological Price Barriers in Frontier Equities

41 Pages Posted: 18 Aug 2016

See all articles by Ales S. Berk

Ales S. Berk

FELU / University of Ljubljana - Faculty of Economics

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: August 17, 2016

Abstract

Psychological barriers are shown to be a feature in frontier market equity pricing. Using MSCI Frontier 100 index constituents; prices, upon breaching an upward or downward psychologically important price point, generally follow predictable patterns in the days after such a breach. It is demonstrated that certain characteristics of frontier markets drive the presence of this relationship. There are regional effects, and also cultural influences as measured by country individualism scores. Liquidity also appears to mediate the presence of psychological barriers. This constitutes a first study of behavioral influences in these fast-growing markets that are being increasingly recognised as an asset class with strong diversification benefits for investors previously restricted to developed and emerging equity markets.

Keywords: frontier markets, psychological barriers, individualism

JEL Classification: G15

Suggested Citation

Berk, Ales S. and Cummins, Mark and Dowling, Michael M. and Lucey, Brian M., Psychological Price Barriers in Frontier Equities (August 17, 2016). Available at SSRN: https://ssrn.com/abstract=2825110 or http://dx.doi.org/10.2139/ssrn.2825110

Ales S. Berk

FELU / University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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 Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

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