Price Clustering on the Tokyo Stock Exchange

Posted: 26 Apr 2007

See all articles by N. Asli Ascioglu

N. Asli Ascioglu

Bryant University

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics

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Abstract

This paper examines price clustering on the Tokyo Stock Exchange. Regardless of tick and lot size, prices ending in zero and five are the most popular. The TSE has no market makers or direct negotiation between traders; therefore, clustering is not explained by collusion or negotiation. Our evidence supports the attraction hypothesis. Clustering also extends to order book depth. There is evidence of strategic trading behavior as traders place orders one price tick better than zero and five to avoid queuing orders at prices ending in these digits. Strategic trading behavior declined and clustering increased when the market became anonymous.

Keywords: Price clustering, depth clustering, limit order market, Tokyo Stock Exchange, anonymity

JEL Classification: G15, G14

Suggested Citation

Ascioglu, N. Asli and Comerton-Forde, Carole and McInish, Thomas H., Price Clustering on the Tokyo Stock Exchange. The Financial Review, Vol. 42, No. 2, May 2007, Available at SSRN: https://ssrn.com/abstract=982263

N. Asli Ascioglu (Contact Author)

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States
(401) 232-6305 (Phone)

Carole Comerton-Forde

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-4662 (Phone)
901-678-3006 (Fax)

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