Abstract
This paper investigates whether informed trading matters to round-number biases. We document the global presence of round-number biases by showing excessive buying (selling) pressure immediately below (above) a rounded threshold. Additionally, we demonstrate that trades surrounding 0-ending prices are likely to be initiated by informed traders who tend to buy (sell) at 9-ending (1-ending) prices. Moreover, small-sized (medium-sized) trades with 1-ending or 9-ending prices are revealed to be more informative and conducted persistently. Collectively, these findings seem to suggest that informed investors strategically engage in stealth trading by leveraging round-number biases of liquidity traders, which indirectly drives this anomaly in global markets.
| Original language | English |
|---|---|
| Pages (from-to) | 105-117 |
| Number of pages | 13 |
| Journal | Journal of Business Research |
| Volume | 92 |
| Early online date | 21 Jul 2018 |
| DOIs | |
| Publication status | Published - Nov 2018 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2018 Elsevier Inc.
Funding
I thank Naveen Donthu (Editor), Kristina Minnick (Associate Editor), and two anonymous referees for their helpful comments and suggestions. This work was supported by the Start-up Research Grant from the University of Macau (grant number SRG2018-00115-FBA ). All errors remain my own responsibility.
Keywords
- Behavioral finance
- Global market
- Informed trading
- Round-number bias
Cite this
- APA
- Author
- BIBTEX
- Harvard
- Standard
- RIS
- Vancouver