Invisible walls: Do psychological barriers really exist in stock index levels?

Sam Alan Woodhouse, Harminder Singh, Sukanto Bhattacharya, Kuldeep Kumar*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

10 Citations (Scopus)


We investigate whether the levels of a stock market index contain any evidence of a behavioural bias depending on the proximity of the index level to 'psychological barriers'. These are certain index levels (usually in multiples of 100) at which the market tends to stick before breaking out either up or down. Extant behavioural finance literature has attributed this to investors' subjective perception of 'something special' about certain index levels where in fact no rational economic basis exists for such a perception. We carry out an empirical analysis of the NASDAQ Composite index and find that barrier effects are indeed present in that stock index. We employ simulation analysis to validate of our obtained results.

Original languageEnglish
Pages (from-to)267-278
Number of pages12
JournalNorth American Journal of Economics and Finance
Publication statusPublished - 1 Apr 2016


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