Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2007
  • Other Unpublished Work

Round Numbers and Security Returns

By: Edward Johnson, Nicole Bastian Johnson and Devin M. Shanthikumar
  • Format:Print
  • | Language:English
ShareBar

Abstract

We document consistent differences in daily stock returns related to round numbers. In particular, we examine returns following previous day closing prices that are just above or just below round number benchmarks. We find, for both one-digit, two-digit and three-digit levels, that returns following closing prices just above a round number benchmark are significantly higher than returns following prices just below a round number benchmark. For example, at the one-digit level we find that returns following "9-ending" prices, which are just below a round number, such as $25.49, are significantly lower than returns following "1-ending" prices such as $25.51, just above the round number. Our results hold when controlling for bid/ask bounce, and are robust for a wide collection of subsamples based on year, firm size, trading volume and exchange. While the magnitude of the return difference varies depending on the type of round number examined, or the particular subsample used, the magnitude generally amounts to between 5 and 20 basis points per day (roughly 15% to 75% annualized). These results are equally strong across subsamples based on institutional ownership. We explore alternate explanations for the pattern.

Keywords

Stocks; Investment Return; Price; Market Transactions

Citation

Johnson, Edward, Nicole Bastian Johnson, and Devin M. Shanthikumar. "Round Numbers and Security Returns." November 2007.

More from the Authors

    • May 2013
    • Management Science

    The Stock Selection and Performance of Buy-Side Analysts

    By: Boris Groysberg, Paul Healy, George Serafeim and Devin Shanthikumar
    • June 2010
    • Faculty Research

    Digital Link (B)

    • June 2010
    • Faculty Research

    Digital Link (A)

More from the Authors
  • The Stock Selection and Performance of Buy-Side Analysts By: Boris Groysberg, Paul Healy, George Serafeim and Devin Shanthikumar
  • Digital Link (B) 
  • Digital Link (A) 
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College