Price clustering on the Australian stock exchange

Michael Aitken, Philip Brown*, Christine Buckland, H. Y. Izan, Terry Walter

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

58 Citations (Scopus)


Price clustering is manifest in some prices being observed more frequently than others, when underlying value is uniformly distributed over the range of admissible prices. It is frequently observed in financial markets. We investigate clustering in individual trades effected on the Australian Stock Exchange's wholly computerised, order-driven trading system. We find that price clustering is pervasive, tending to follow an overall pattern somewhat similar to that found in US securities markets. Clustering results from imprecise beliefs ('haziness') about firm value together with the existence of conventional, salient focal points within regions of haziness. Thus we find that clustering increases with the price of the stock (reflecting imprecision in beliefs about firm value) and with surrogates for greater haziness such as higher market-wide volatility, own stock volatility, trade size, and the size of the bid-ask spread. Clustering is lower when price discovery is likely to be more efficient; that is, it decreases with trading frequency, and it is lower for stocks with options traded on them and for stocks that can be sold short.

Original languageEnglish
Pages (from-to)297-314
Number of pages18
JournalPacific-Basin Finance Journal
Issue number2-3
Publication statusPublished - Jul 1996
Externally publishedYes


  • Australian stock exchange
  • Price clustering
  • Stock prices


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