Psychological Price Barriers in Frontier Equities

41 Pages Posted: 18 Aug 2016

See all articles by Ales S. Berk

Ales S. Berk

SEB LU / University of Ljubljana - School of Economics and Business

Mark Cummins

University of Strathclyde

Michael M. Dowling

Dublin City University Business School; ESC Rennes School of Business

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Jiangxi University of Finance and Economics; Abu Dhabi University - College of Business Administration; Ho Chi Minh City University of Economics and Finance

Date Written: August 17, 2016

Abstract

Psychological barriers are shown to be a feature in frontier market equity pricing. Using MSCI Frontier 100 index constituents; prices, upon breaching an upward or downward psychologically important price point, generally follow predictable patterns in the days after such a breach. It is demonstrated that certain characteristics of frontier markets drive the presence of this relationship. There are regional effects, and also cultural influences as measured by country individualism scores. Liquidity also appears to mediate the presence of psychological barriers. This constitutes a first study of behavioral influences in these fast-growing markets that are being increasingly recognised as an asset class with strong diversification benefits for investors previously restricted to developed and emerging equity markets.

Keywords: frontier markets, psychological barriers, individualism

JEL Classification: G15

Suggested Citation

Berk, Ales S. and Cummins, Mark and Dowling, Michael M. and Lucey, Brian M., Psychological Price Barriers in Frontier Equities (August 17, 2016). Available at SSRN: https://ssrn.com/abstract=2825110 or http://dx.doi.org/10.2139/ssrn.2825110

Ales S. Berk

SEB LU / University of Ljubljana - School of Economics and Business ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Mark Cummins

University of Strathclyde ( email )

16 Richmond Street
Glasgow 1XQ, Scotland G1 1XQ
United Kingdom

Michael M. Dowling

Dublin City University Business School ( email )

Dublin 9
Ireland

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000
France

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Abu Dhabi University - College of Business Administration ( email )

PO Box 59911
Abu Dhabi, Abu Dhabi 59911
United Arab Emirates

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

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