The Influence of Cultural Factors on Price Clustering

Philip Brown, Angeline Chua, Jason Mitchell

Research output: Contribution to journalArticlepeer-review

57 Citations (Scopus)


Price clustering is the tendency of prices to be observed more frequently at some numbers than others. It increases with haziness, or imprecision, about underlying value. Most research on price clustering has been conducted in Western financial markets, where there is manifest preference for trading at round numbers. We focus on number preferences under Chinese culture. Many Chinese believe some numbers are ‘‘unlucky’’ and to be avoided. For instance, the number 4 is inauspicious because the Cantonese pronunciation of 4 is similar to the phrase ‘‘to die’’. We first document clustering of daily closing prices on six Asia–Pacific stock markets, three with predominantly Chinese populations. Next, we fit binomial logit models within these markets to estimate the association between structural and economic factors, and culture, on price clustering. We find some
support for the influence of Chinese culture and superstition on year-round number preferences of traders, but it is located solely in the Hong Kong market. Furthermore, in the Hong Kong market Chinese culture and superstition help explain the increased avoidance of the number 4 during the auspicious Chinese New Year, Dragon Boat and Mid-Autumn festivals.
Original languageEnglish
Pages (from-to)307-332
Number of pages26
JournalPacific-Basin Finance Journal
Publication statusPublished - 2002


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