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Price Clustering in Bank Stocks During the Global Financial Crisis

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  • Júlio Lobão
  • Luís Pacheco
  • Luís Alves

Abstract

Market anomalies are one of the most intriguing and fascinating phenomena observed in financial markets. This paper examines the incidence of price clustering in US and European bank stocks during the Global Financial Crisis. The results reveal a significant level of price clustering in European and US banks’ samples, which is difficult to reconcile with the Efficient Market hypothesis. The Attraction hypothesis and the Price Resolution/Negotiation hypothesis seem to be the best explanations for the clustering effect. However, the results also suggest that the uncertainty associated with the crisis did not have a significant impact in the clustering levels, which is at odds with the recently proposed Panic Trading hypothesis. Surprisingly, we observe a tendency to have less price clustering during the period of crisis and banks located in countries mostly affected by the European sovereign debt crisis exhibit lower levels of price clustering. These results are consistent with the idea that investors tend to be more analytical in their appraisals in periods of negative sentiment. JEL Codes - G12; G14; G01; G4

Suggested Citation

  • Júlio Lobão & Luís Pacheco & Luís Alves, 2019. "Price Clustering in Bank Stocks During the Global Financial Crisis," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 66(4), pages 465-486, December.
    • Handle: RePEc:aic:saebjn:v:66:y:2019:i:4:p:465-486:n:167
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    References listed on IDEAS

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    More about this item

    Keywords

    price clustering; financial crisis; behavioral finance; sovereign debt crisis; banking industry;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G01 - Financial Economics - - General - - - Financial Crises
    • G4 - Financial Economics - - Behavioral Finance

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