Abstract
This paper examines the existence of round number price barriers in the U.S. stock market. I show that stock prices clusters around multiples of $10 as a result of the price barriers. The price barriers results in abnormal future return pattern; a long-short portfolio formed around the barrier held for a week produces 17 basis point weekly return (8% annually). Such abnormal return does not change in magnitude after controlling for varies factors. I present supportive evidence for the left-digit-bias barrier channel.
Source – Lam, Ammon, Round Number Price Barriers in U.S. Stock Market (May 30, 2018).
