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The clustering of bid/ask prices and the spread in the foreign exchange market

Goodhart, C. A. E. and Curcio, Riccardo (1991) The clustering of bid/ask prices and the spread in the foreign exchange market. Financial Markets Group Discussion Papers (110). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Following Lawrence Harris' (1989b) study of price clustering in stock prices, we examine the smae phenomenon in the forex market. The pattern of clustering in the final digit of bid/ask prices depends on the desired degree of price resolution. The selection of spreads also involves clustering, but this is driven by a different behavioural pattern, consistent with the pure attraction hypothesis. The combination of the two patterns can explain the differing frequencies of final digits in the bids as compared with the asks.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 1991 The Authors
Divisions: Financial Markets Group
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: F - International Economics > F3 - International Finance > F31 - Foreign Exchange
G - Financial Economics > G0 - General > G00 - General
Date Deposited: 17 May 2023 08:48
Last Modified: 16 Sep 2023 00:03

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