Title

New evidence of psychological barrier from the oil market

Document Type

Journal Article

Publisher

Taylor & Francis

School

School of Business and Law

RAS ID

26067

Comments

Originally published as:

Narayan, P. K., Ranjeeni, K., & Bannigidadmath, D. (2017). New evidence of psychological barrier from the oil market. Journal of Behavioral Finance, 18(4), 457-469. doi:10.1080/15427560.2017.1365235

Original article available here.

Abstract

The authors examine how stock returns were affected when the oil price reached the psychological barrier of US$100 per barrel for the first time in history. Using an event study approach, 4 key results emerge. First, the authors show that a psychological barrier event in the oil market does affect stock returns. Second, they show that a psychological barrier event in the oil market is a source of return drift—a phenomenon well explained and understood with respect to nonoil news events. Third, the psychological barrier affects small/medium-sized stocks and not large stocks. Last, the authors show that successful trading strategies can be devised based on the information that the oil price psychological barrier significantly impacts the market and that it contributes to return drift.

DOI

10.1080/15427560.2017.1365235

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