Price Clustering in Bank Stocks During the Global Financial Crisis


  • Júlio Lobão
  • Luís Pacheco
  • Luís Alves



price clustering, financial crisis, behavioral finance, sovereign debt crisis, banking industry


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


Aitken, M., Brown, P., Buckland, C., Izan, H. Y., and Walter, T., 1996. Price clustering on the Australian Stock Exchange. Pacific-Basin Finance Journal, 4(2-3), 297-314.

Alloy, L. B., and Abramson, L. Y., 1979. Judgment of contingency in depressed and nondepressed students: Sadder but wiser? Journal of Experimental Psychology. General, 108(4), 441-485.

Anderson, R. C., and Fraser, D. R., 2000. Corporate control, bank risk taking, and the health of the banking industry. Journal of Banking & Finance, 24(8), 1383-1398.

ap Gwilym, O., Clare, A., and Thomas, S., 1998. Extreme price clustering in the London equity index futures and options markets. Journal of Banking & Finance, 22(9), 1193-1206.

Aşçıoğlu, A., Comerton-Forde, C., and McInish, T. H., 2007. Price clustering on the Tokyo stock exchange. Financial Review, 42(2), 289-301.

Athanasoglou, P. P., Brissimis, S. N., and Delis, M. D., 2008. Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121-136.

Attinasi, M. G., Checherita-Westphal, C. D., and Nickel, C., 2009. What explains the surge in euro area sovereign spreads during the financial crisis of 2007-09? . European Central Bank Working Paper(1131).

Baig, A., Blau, B. M., and Sabah, N., 2019. Price clustering and sentiment in bitcoin. Finance Research Letters, 29, 111-116.

Ball, C. A., Torous, W. N., and Tschoegl, A. E., 1985. The degree of price resolution: The case of the gold market. Journal of Futures Markets, 5(1), 29-43.

Beirne, J., and Fratzscher, M., 2013. The pricing of sovereign risk and contagion during the European sovereign debt crisis. Journal of International Money and Finance, 34, 60-82.

Berger, A. N., Bonime, S. D., Covitz, D. M., and Hancock, D., 2000. Why are bank profits so persistent? The roles of product market competition, informational opacity, and regional/macroeconomic shocks. Journal of Banking & Finance, 24(7), 1203-1235.

Bharati, R., Crain, S. J., and Kaminski, V., 2012. Clustering in crude oil prices and the target pricing zone hypothesis. Energy Economics, 34(4), 1115-1123.

Blau, B. M., and Griffith, T. G., 2016. Price clustering and the stability of stock prices. Journal of Business Research, 69(10), 3933-3942.

Brown, A., and Yang, F., 2016. Limited cognition and clustered asset prices: Evidence from betting markets. Journal of Financial Markets, 29, 27-46.

Brown, P., Chua, A., and Mitchell, J., 2002. The influence of cultural factors on price clustering: Evidence from Asia-Pacific stock markets. Pacific-Basin Finance Journal, 10(3), 307-332.

Brown, P., and Mitchell, J., 2008. Culture and stock price clustering: Evidence from The Peoples' Republic of China. Pacific-Basin Finance Journal, 16(1), 95-120.

Christie, W. G., Harris, J. H., and Schultz, P. H., 1994. Why did NASDAQ market makers stop avoiding odd-eighth quotes? The Journal of Finance, 49(5), 1841-1860.

Cooper, M. J., Gutierrez, R. C., and Hameed, A., 2004. Market states and momentum. The Journal of Finance, 59(3), 1345-1365.

Curcio, R., and Goodhart, C., 1991. The clustering of bid/ask prices and the spread in the foreign exchange market: LSE Financial Markets Group.

Das, S., and Kadapakkam, P. R., 2018. Machine over mind? Stock price clustering in the era of algorithmic trading. The North American Journal of Economics and Finance, 100831.

Davis, S., Madura, J., and Marciniak, M., 2009. Performance and risk among types of Exchange-Traded Funds during the financial crisis. ETFs and Indexing(1), 182-188.

De Grauwe, P., and Decupere, D., 1992. Psychological barriers in the foreign exchange market. CEPR Discussion Papers, 621.

Durand, R. B., Simon, M., and Szimayer, A., 2009. Anger, sadness and bear markets. Applied Financial Economics, 19(5), 357-369.

García, D., 2013. Sentiment during recessions. The Journal of Finance, 68(3), 1267-1300.

Hameed, A., and Terry, E., 1998. The effect of tick size on price clustering and trading volume. Journal of Business Finance & Accounting, 25(7-8), 849-867.

Harris, L., 1991. Stock-price clustering and discreteness. Review of Financial Studies, 4(3), 389-415.

Hu, B., Jiang, C., McInish, T., and Ning, Y., 2019. Price Clustering of Chinese IPOs: The Impact of Regulation, Cultural Factors, and Negotiation. Applied Economics, 51(36), 3995-4007.

Huang, R. D., and Stoll, H. R., 1996. Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE. Journal of Financial Economics, 41(3), 313-357.

Ikenberry, D. L., and Weston, J. P., 2008. Clustering in US stock prices after decimalisation. European Financial Management, 14(1), 30-54.

Isen, A. M., 1987. Positive affect, cognitive processes, and social behavior (pp. 203-253): Academic Press.

Kanagaretnam, K., Lim, C. Y., and Lobo, G. J., 2014. Influence of national culture on accounting conservatism and risk-taking in the banking industry. The Accounting Review, 89(3), 1115-1149.

Kandel, S., Sarig, O., and Wohl, A., 2001. Do investors prefer round stock prices? Evidence from Israeli IPO auctions. Journal of Banking & Finance, 25(8), 1543-1551.

Laeven, L., and Levine, R., 2009. Bank governance, regulation and risk taking. Journal of Financial Economics, 93(2), 259-275.

Lakonishok, J., Shleifer, A., and Vishny, R. W., 1994. Contrarian investment, extrapolation, and risk. The Journal of Finance, 49(5), 1541-1578.

Lee, C., and Swaminathan, B., 2000. Price momentum and trading volume. The Journal of Finance, 55(5), 2017-2069.

Mitchell, J., 2001. Clustering and psychological barriers: The importance of numbers. Journal of Futures Markets, 21(5), 395-428.

Mola, S., and Loughran, T., 2004. Discounting and Clustering in Seasoned Equity Offering Prices. Journal of Financial and Quantitative Analysis, 39(1), 1-23.

Narayan, P. K., Narayan, S., and Popp, S., 2011. Investigating price clustering in the oil futures market. Applied Energy, 88(1), 397-402.

Narayan, P. K., and Smyth, R., 2013. Has political instability contributed to price clustering on Fiji's stock market? Journal of Asian Economics, 28, 125-130.

Niederhoffer, V., 1965. Clustering of stock prices. Operations Research, 13(2), 258-265.

Ohta, W., 2006. An analysis of intraday patterns in price clustering on the Tokyo Stock Exchange. Journal of Banking & Finance, 30(3), 1023-1039.

Osborne, M. F., 1962. Periodic structure in the Brownian motion of stock prices. Operations Research, 10(3), 345-379.

Palao, F., and Pardo, A., 2012. Assessing price clustering in European carbon markets. Applied Energy, 92, 51-56.

Schwarz, N., 1990. Feelings as information: Informational and motivational functions of affective states. In E. T. Higgins and R. M. Sorrentino (Eds.), Handbook of motivation and cognition: Foundations of social behavior, 2 (pp. 527-561). New York, US: The Guilford Press.

Sinclair, R. C., and Mark, M. M., 1995. The effects of mood state on judgemental accuracy: Processing strategy as a mechanism. Cognition and Emotion, 9(5), 417-438.

Sopranzetti, B. J., and Datar, V., 2002. Price clustering in foreign exchange spot markets. Journal of Financial Markets, 5(4), 411-417.

Urquhart, A., 2017. Price clustering in Bitcoin. Economics Letters, 159, 145-148.

Wen, Y., 2016. Bank opacity and crash risk. Accounting and Finance Research, 5(2), 138.




How to Cite

Lobão, J., Pacheco, L., & Alves, L. (2019). Price Clustering in Bank Stocks During the Global Financial Crisis. Scientific Annals of Economics and Business, 66(4), 465–486.