Looking for Psychological Barriers in nine European Stock Market Indices

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Publication Details

Author list: Lobão J
Publisher: Lectito Publishing
Publication year: 2016
Journal: Dutch Journal of Finance and Management (2468-211X)
Volume number: 1
Issue number: 1
ISSN: 2468-211X
Languages: English-Great Britain (EN-GB)


Abstract

In this paper we examine nine European stock market indices for
indication of psychological barriers at round numbers. We test for
uniformity in the trailing digits of the indices and use regression and
GARCH analysis to assess the differential impact of being above or below
a possible barrier. Despite having rejected uniformity for all data
series, we only found significant psychological barriers in the stock
markets of Germany, Finland and the Netherlands. Moreover, we document
that the relationship between risk and return tends to be weaker at the
proximity of round numbers which poses a challenge to the traditional
equilibrium models.


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Last updated on 2019-13-08 at 00:15