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Behavioral Influences in Non-Ferrous Metals Prices

Mark Cummins, Michael Dowling, Brian M. Lucey

IIIS Discussion Paper No. 459

Recent research has identied the presence of behavioral inuences on traders in pre dominantly professionally traded markets such as oil, gold, and foreign exchange. Previous research had largely conned behavioral-based investigations to equity markets due to an assumption that noise traders would drive any influence and these traders were mainly absent from the professionally traded markets. This paper extends this research to the non-ferrous metals markets and demonstrates similar inuences on prices. It is shown that psychological price barriers, where there is predictable trading patterns around psychologically important price points, are important. Specically, lead, zinc, and aluminium alloy, show anomalous price reactions in the days particularly following a breach of a $1,000 price point. There is also evidence presented of negative price clustering before key price barriers. Subperiod tests further indicate that the relevant psychological price point is dependent on average prices. Recognising the multiple hypothesis testing nature of the study, generalized Bonferroni corrections are implemented to provide a robust control for the possibility of data mining. This represents a first investigation of behavioral influences in non-ferrous metals prices, and suggests these markets are not immune to trader biases influencing the setting of prices.

JEL Classication: G13, G14, L61
Keywords: psychological barriers; clustering; non-ferrous metals.

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Last updated 10 December 2014 by IIIS (Email).