Influence of cultural factors on price clustering and price resistance in China's stock markets

Abstract

This paper builds on prior research by analysing the impact of cultural factors on both price clustering and price resistance in China's stock markets. The results support the presence of cultural factors impacting on price clustering with the digit 8 showing a higher propensity for clustering and the digits 4 and 7 showing a lower propensity in the A-share market, where stock is denominated in renminbi and traded by mainland Chinese. These results are further supported by an analysis of the B-share market, where cultural factors have no (or less) impact on the price of Chinese stocks traded by foreign investors in US dollars (or in Hong Kong dollars). A range of measures for price resistance show the digits 0 and 5 to be significant resistance points in the A-share market. Although digit 8 cannot be considered as a resistance point, its resistance level is highest among the remaining numbers. In conclusion, cultural factors help to explain not only price clustering in the Chinese stock markets but price resistance levels as well, albeit at a weak level. Copyright (c) The Authors Journal compilation (c) 2007 AFAANZ.

Cointegration and causality among the onshore and offshore markets for China's currency

“…Less-rapid information flow domestically could have caused traders to rely more on price movements or rumors, which in turn leads to greater trend-following and hence overshooting. Cultural factors of domestic participants could have also been at work, as was found in the Chinese stock market by Cai et al (2007). A higher discount rate onshore, for instance, would attach greater importance to shorter-term factors and hence result in greater volatility, since these factors are more uncertain.…”

Psychological Barriers in Single Stock Prices: Evidence from Three Emerging Markets

“…However, to the best of our knowledge, only Cai et al (2007) and Dorfleitner and Klein (2009) have thus far addressed the presence of psychological barriers in single stock prices. Cai et al (2007) assessed the existence of psychological barriers in a total of 1050 A-shares and 100 B-shares from both the Shanghai Stock Exchange and the Shenzhen Stock Exchange during June 2002.…”

“…Cai et al (2007) assessed the existence of psychological barriers in a total of 1050 A-shares and 100 B-shares from both the Shanghai Stock Exchange and the Shenzhen Stock Exchange during June 2002. A range of measures for price resistance showed the digits 0 and 5 to be significant resistance points in the A-share market.…”

“…Before now, only Cai, Cai and Keasey (2007) and Dorfleitner and Klein (2009) had examined individual stocks, considering Chinese stocks and German stocks, respectively.…”

Number Preferences in Lotteries

“…In housing markets, houses with a number ending in eight are traded at a premium, whereas houses with a number ending in four are traded at a discount (Bourassa & Peng, 1999;Chau, Ma & Ho, 2001;Agarwal, He, Liu, Png, Sing & Wong, 2014;Fortin, Hill & Huang, 2014;Shum, Sun & Ye, 2014). In financial markets, culture-inspired number prefer-ences cause particular limit-order and transaction prices to be more frequent than other ones (Brown, Chua & Mitchell, 2002;He & Wu, 2006;Cai, Cai & Keasey, 2007;Brown & Mitchell, 2008;Bhattacharya, Kuo, Lin & Zhao, 2016). Moreover, the shares of newly listed firms with lucky listing codes seem to be overvalued and underperform those with unlucky listing codes (Hirshleifer, Jian & Zhang, 2014).…”