Has Political Instability Contributed to Price Clustering on Fiji’s Stock Market?

SWP 2011/03

21 Pages Posted: 7 May 2012

See all articles by Paresh Kumar Narayan

Paresh Kumar Narayan

Deakin University - School of Accounting, Economics and Finance

Russell Smyth

Monash University - Department of Economics

Date Written: August 2011

Abstract

The goal of this paper is to examine evidence of stock price clustering on the South Pacific Stock Exchange, located in Fiji, and explore its determinants. We find that stock prices cluster at the decimal of 0 and 5, with almost half of prices settling on these two decimals. Upon investigating the determinants of price clustering on the South Pacific Stock Exchange we find that price level and volume of trade have a statistically significant positive effect on price clustering. We also propose and test a "panic trading" hypothesis which states political instability induces price clustering. We find evidence that political instability in Fiji induces price clustering behaviour.

Suggested Citation

Narayan, Paresh Kumar and Smyth, Russell, Has Political Instability Contributed to Price Clustering on Fiji’s Stock Market? (August 2011). SWP 2011/03, Available at SSRN: https://ssrn.com/abstract=2052114 or http://dx.doi.org/10.2139/ssrn.2052114

Paresh Kumar Narayan (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Russell Smyth

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia