Did the psychological barrier of US$100 crude oil price have an impact on price clustering behaviour in the oil futures market

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Title: Did the psychological barrier of US$100 crude oil price have an impact on price clustering behaviour in the oil futures market
Author(s): Lee, Murphy; Yap, Chee Jin; Narayan, Paresh Kumar
Abstract: In this paper, we test the price clustering theory in the crude oil futures market. Our novelty is that we consider the psychological barrier effect on price clustering and its determinants in the crude oil futures market. We find that prices tend to cluster on zero and five three weeks before the crude oil price reached the $100 per barrel mark and three weeks after the price rise. However, in the post- $100 price period, price clustering declines. We examine the determinants of price clustering and fmd that while size, volume, tick volume, and volatility have similar effects in terms of sign and significance in both periods, the spread variable is only significant (and positive) in the post-$IOO rise period. The general decline in price clustering and the significance of the spread variable suggests that once a price psychological effect elapses, traders in the crude oil futures market behave differently than when the price approaches a high price level.
Publication type: Conference paper
Research centre: Swinburne University of Technology
Source: Proceedings of the 17th Conference on the Theories and Practices of Securities and Markets (SFM 2009), Kaohsiung, Taiwan, 11-12 December 2009
Publication year: 2009
FOR Code(s): 140299 Applied Economics not elsewhere classified; 150205 Investment and Risk Management; 170113 Social and Community Psychology
Keyword(s): Crude oil; Futures Market; Price Clustering; Psychological Barrier
Publisher: Department of Finance, National Sun Yat-sen University
Publisher URL: http://www.finance.nsysu.edu.tw/SFM/
Peer reviewed