Nines in the Endings of Stock Prices
27 Pages Posted: 26 May 2005
Date Written: January 2006
Abstract
In this paper, we ask whether investors' responses to nines in the rightmost digits of stock prices are similar to consumers' responses to nines in the rightmost digits of retail prices. In contrast to the increase in demand that is often observed for 9-ending retail prices, excessive overnight selling tends to follow stocks that close on 9-ending prices. Additional analysis indicates this may be due to a resistance level created by round-dollar stock prices. This finding sheds light on alterative explanations offered for the clustering of ending digits in prices and may provide guidance on how to expand or adjust the maximizing explanations for the phenomenon.
Keywords: Behavioral finance, rational prices, barriers, resistance level, price clustering
JEL Classification: D40, G10, G12, M30
Suggested Citation: Suggested Citation
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