Looking for Psychological Barriers in nine European Stock Market Indices

Júlio  Lobão; Cristiano Pereira

doi:10.20897/lectito.201639

Looking for Psychological Barriers in nine European Stock Market Indices

Júlio Lobão ¹ ^* , Cristiano Pereira ¹ ^*

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¹ Universidade do Porto, PORTUGAL
^* Corresponding Author

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Research Article

Dutch Journal of Finance and Management, 2016 - Volume 1 Issue 1, Article No: 39
https://doi.org/10.20897/lectito.201639

Published Online: 08 Aug 2016

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APA 6th edition

In-text citation: (Lobão & Pereira, 2016)
Reference: Lobão, J., & Pereira, C. (2016). Looking for Psychological Barriers in nine European Stock Market Indices. Dutch Journal of Finance and Management, 1(1), 39. https://doi.org/10.20897/lectito.201639

Vancouver

In-text citation: (1), (2), (3), etc.
Reference: Lobão J, Pereira C. Looking for Psychological Barriers in nine European Stock Market Indices. Dutch Journal of Finance and Management. 2016;1(1):39. https://doi.org/10.20897/lectito.201639

AMA 10th edition

In-text citation: (1), (2), (3), etc.
Reference: Lobão J, Pereira C. Looking for Psychological Barriers in nine European Stock Market Indices. Dutch Journal of Finance and Management. 2016;1(1), 39. https://doi.org/10.20897/lectito.201639

Chicago

In-text citation: (Lobão and Pereira, 2016)
Reference: Lobão, Júlio, and Cristiano Pereira. "Looking for Psychological Barriers in nine European Stock Market Indices". Dutch Journal of Finance and Management 2016 1 no. 1 (2016): 39. https://doi.org/10.20897/lectito.201639

Harvard

In-text citation: (Lobão and Pereira, 2016)
Reference: Lobão, J., and Pereira, C. (2016). Looking for Psychological Barriers in nine European Stock Market Indices. Dutch Journal of Finance and Management, 1(1), 39. https://doi.org/10.20897/lectito.201639

MLA

In-text citation: (Lobão and Pereira, 2016)
Reference: Lobão, Júlio et al. "Looking for Psychological Barriers in nine European Stock Market Indices". Dutch Journal of Finance and Management, vol. 1, no. 1, 2016, 39. https://doi.org/10.20897/lectito.201639

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.

KEYWORDS

psychological barriers M-values stock market indices market psychology round numbers

REFERENCES

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.