Price clustering and underpricing in the IPO aftermarket

Gwilym, Owain ap; Verousis, Thanos

doi:10.1016/j.irfa.2010.01.007

Cited by 10 publications

(6 citation statements)

References 33 publications

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“…This evidence implies that price clustering is a source of oil market inefficiency –and this inefficiency can be exploited in devising trading strategies. Our work connects to studies that show price clustering in the foreign exchange market ( Sopranzetti & Datar, 2002 ), equities and futures markets (ap Gwilym et al Ap Gwilym, Clare, & Thomas, 1998 ; Ohta, 2006 ), IPOs (ap Gwilym and Verousis Ap Gwilym & Verousis, 2010 ), and index options ( Capelle-Blanchard & Chaudhury, 2007 ; Ni, Pearson, & Proteshman, 2005 ). 2 We add to these studies by showing the presence of price clustering in oil prices.…”

Section: Introductionsupporting

confidence: 80%

Evidence of oil market price clustering during the COVID-19 pandemic

Narayan

2022

International Review of Financial Analysis

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We use hourly data on opening price, closing price, opening ask price, opening bid price, closing ask price and closing bid price to show that while oil prices are characterized by price clustering behavior, prices tend to cluster on numbers closer to zero than to one. Comparing the pre-COVID-19 sample with the COVID-19 sample, we find that evidence of price clustering is 8% more in the COVID-19 sample. We test the determinants of price clustering and find that as much as 30% of the price clustering behavior can be attributed to the COVID-19 pandemic. Finally, using a simple technical trading strategy, we do not find any evidence that the oil market is profitable in the COVID-19 period.

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Section: Introductionsupporting

confidence: 80%

Evidence of oil market price clustering during the COVID-19 pandemic

Narayan

2022

International Review of Financial Analysis

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“…Many previous studies focused on financial markets have presented significant evidences of continued mispricing of investable assets (Boswijk et al, 2007;Beltratti and Morana, 2010;Gwilym and Verousis, 2010;Necula, 2012;Noussair et al, 2016). A framework of market structures based on perfect competition or monopolistic competition does not easily explain continued mispricing over a prolonged period of time.…”

Section: Introductionmentioning

confidence: 97%

A Supply-Lock Competitive Market for Investable Products

Wang

2016

Asian Development Policy Review

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We propose a new market structure, a supply-lock competition (SLC), for analyzing transactions of investable goods. This study explains and analyzes how the SLC is applicable for transactions of stock, art, real estate, currency, and scarce goods. We suggest that the formation and fluctuation of the market price for these investable assets are not only related to their intrinsic values or investors' behavior, but are also derived from supply restriction. A mechanism of the SLC market structure benefits market efficiency but also continues volatility of asset prices in secondary markets as well. We demonstrate that a demand orientation dominates the valuation of investable assets, resulting in a divergence of market price and intrinsic value.

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“…Fourthly, and Christie, Harris and Schultz (1994) attribute price clustering at NASDAQ to the anticompetitive behaviour of dealers who implicitly colluded to increase market making revenues. Numerous empirical studies document price clustering in the equity, derivatives and foreign exchange markets (see Ahn et al, 2005, ap Gwilym and Verousis, 2010, Chung and Chiang, 2006, Narayan et al, 2011and Sopranzetti and Datar, 2002.…”

Section: Literature Review and Positioning Of The Papermentioning

confidence: 99%

Trade size clustering and the cost of trading at the London Stock Exchange

Verousis

Gwilym

2013

International Review of Financial Analysis

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For the London Stock Exchange, this paper investigates differences in trading costs between market maker (off-book) and order book trades, in the context of clustering in trade sizes and prices. We report several substantial findings. Even after controlling for differences in trade size, the realised spread measure is lower for off-book trades. For the order book, trade size clustering is not associated with differences in transaction costs nor with differences in the information content of trades. For the off-book market, trades in clustered (popular) sizes carry significantly more information than non-clustered trades. Despite the significant differences in the price impact estimates between the order book and off-book, we show that traders placing large orders off-book are still better off than trading via the order book as they benefit from a large discount from the current midpoint price. Additionally, we highlight that price and size clustering tend to occur simultaneously rather than being substitutes in this market setting.

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Price clustering and underpricing in the IPO aftermarket

Cited by 10 publications

References 33 publications

Evidence of oil market price clustering during the COVID-19 pandemic

Evidence of oil market price clustering during the COVID-19 pandemic

A Supply-Lock Competitive Market for Investable Products

Trade size clustering and the cost of trading at the London Stock Exchange

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