Nominal Stock Price Anchors: A Global Phenomenon?

34 Pages Posted: 15 Jul 2019

See all articles by Kee-Hong Bae

Kee-Hong Bae

York University - Schulich School of Business

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Jisok Kang

John Carroll University - Department of Economics & Finance

S. Ghon Rhee

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

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2019

Abstract

Weld, Michaely, Thaler, and Benartzi (2009) find that the average nominal U.S. stock price 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 this nominal price fixation is a global phenomenon. We exploit the introduction of the Euro in 1999 to show that stock splits maintain these nominal stock price anchors. Generally, firms in countries with larger drops in nominal prices had fewer stock splits after stock prices are displayed in Euros.

Keywords: anchoring, norms, nominal share price, stock splits, reverse stock splits

JEL Classification: G02, G14, G15

Suggested Citation

Bae, Kee-Hong and Bhattacharya, Utpal and Kang, Jisok and Rhee, S. Ghon, Nominal Stock Price Anchors: A Global Phenomenon? (May 1, 2019). HKUST IEMS Working Paper No. 2019-64 . Available at SSRN: https://ssrn.com/abstract=3419655 or http://dx.doi.org/10.2139/ssrn.3419655

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)

Utpal Bhattacharya (Contact Author)

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Jisok Kang

John Carroll University - Department of Economics & Finance ( email )

University Heights, OH 44118
United States

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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