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Price Clustering on the Tokyo Stock Exchange
Author(s) -
Aşçıoğlu Aslı,
ComertonForde Carole,
McInish Thomas H.
Publication year - 2007
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2007.00172.x
Subject(s) - collusion , cluster analysis , stock exchange , negotiation , market maker , tick size , order (exchange) , business , economics , financial economics , order book , stock market , microeconomics , finance , computer science , paleontology , horse , machine learning , political science , law , biology
This paper examines price clustering on the Tokyo Stock Exchange (TSE). 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.