Selected paper

Jasiniak, Magdalena
Stock Prices and the Rate of Return Analysis: The Case of Warsaw Stock Exchange
Year: 2018
Volume: 9
Issue: 1
Pages: 21-34
JEL: G02, G11
DOI: 10.5817/FAI2018-1-2


face nominal effect, low price anomaly, behavioral finance, capital market anomalies, investment risk

The main aims of this article are to verify whether rates of return might be determined by stock prices and to evaluate low price anomaly on the example of Warsaw Stock Exchange. The author states that cheap assets characterized by nominally lower prices are more attractive to buy and bring higher profits in comparison to assets described as expensive. In order to verify the hypothesis, database of 13789 quotations from 1.07.1999 to 30.12.2013 was created. The sample was divided into three groups – cheap, average, and expensive stocks. Finally, the statistical analysis was conducted using 2924 records including only cheap and expensive units. Statistical analysis confirms that low–priced assets generate higher profits and lower losses.


Baker, M., Greenwood R. and Wurgler, J. (2009). Catering Through Nominal Share Prices. The Journal of Finance, 64(6), pp. 2559-2590. Biegańska, K., Jasiniak, M., Pastusiak, R. and Pluskota, A. (2016). Efekt Zakotwiczenia w Transakcjach Fuzji i Przejęć na Przykładzie Polski. Finanse, Rynki Finansowe, Ubezpieczenia, 1(79), pp. 585-593. Bhardwaj, R. K. and Brooks, L.D. (1992). The January Anomaly: Effects of Low Share Price, Transaction Costs, and Bid‐Ask Bias. The Journal of Finance, 47(2), pp. 553-575. Branch, B. and Chang, K. (1990). Low Price Stocks and the January Effect. Quarterly Journal of Business and Economics, pp. 90-118. Christie, W.G. and Schultz, P.H. (1994). Why do NASDAQ Market Makers Avoid Odd‐Eighth Quotes? The Journal of Finance, 49(5), pp. 1813-1840. Fritzmeier, L.H. (1936). Relative Price Fluctuations of Industrial Stocks in Different Price Groups. Journal of Business, 9(2), pp. 133-154. Godek, P.E. (1996). Why Nasdaq Market Makers Avoid Odd-Eighth Quotes. Journal of Financial Economics, 41(3), pp. 465-474. Goodman, D.A. and Peavy, J.W.III. (1986). The Interaction of Firm Size and Price-Earnings Ratio on Portfolio Performance. Financial Analysts Journal, 42(1), pp. 9-12. Goodhart, C. and Currio, R. (1990). Asset Price Discovery and Price Clustering in the Foreign Exchange Market. Working paper, London School of Economics. Grossman, S., Miller, M.H., Cone, K.R., Fischel, D.R. and Ross, D.J. (1997). Clustering and Competition in Asset Markets. The Journal of Law and Economics, 40(1), pp. 23-60. Harris, L. (1991). Stock Price Clustering and Discreteness. The Review of Financial Studies, 4(3), pp. 389-415. Hwang, S. and Lu, C. (2008). Is Share Price Relevant? SSRN Working paper. Kahn, C., Pennacchi, G. and Sopranzetti, B. (1999). Bank Deposit Rate Clustering: Theory and Empirical Evidence. Journal of Finance, 54(6), pp. 2185-2214. Kahneman, D. and Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), pp. 267-291. Kandel, E. and Marx, L. M. (1997). Nasdaq Market Structure and Spread Patterns. Journal of Financial Economics, 45(1), pp. 61-89. Keller, J. and Pastusiak, R. (2015). Rekomendacje Inwestycyjne a Realia Gospodarcze-nadmierny Optymizmu Wśród Analityków Giełdowych. Ekonomista, (6), pp. 910-920. Neiderhoffer, V. (1965). Clustering of Stock Prices. Operations Research, 13(2), pp. 258-265. Neiderhoffer, V., (1966). A New Look at Clustering of Stock Prices. Journal of Business, 39(2), pp. 390-413. Neiderhoffer, V. and Osborne, M. (1966). Market Making and Reversal on the Stock Exchange. Journal of the American Statistical Association, 61(316), pp. 897-916. Nofsinger, J. R. (2006). Psychologia inwestowania. Gliwice: Helion. Odean, T. (1999). Do Investors Trade Too Much? The American Economic Review, 89(5), pp. 1279–1298. Samuelson, W. and Zeckhauser, R. (1988). Status Quo Bias in Decision Making. Journal of Risk and Uncertainty, 1(1) pp. 7-59. Shefrin, H. and Statman, M. (1985). The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence. The Journal of Finance, 40(3), pp. 777-790. Simon, H.A. (1979). Rational Decision Making in Business Organizations. The American Economic Review, 69(4), pp. 493-513. Thaler, R.H. and Johnson, E.J. (1990). Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. Management Science, 36(6), pp. 643-660. Waelkens, K. and Ward, M. (1997). The Low Price Effect on the Johannesburg Stock Exchange. Investment Analysts Journal, 26(45), pp. 35-48. Zaremba, A., Okoń, S., Nowak, A. and Konieczka, P. (2016). The Low Price Anomaly: The Intriguing Case of the Polish Stock Market. Inzinerine Ekonomika-Engineering Economics, 27(2), pp. 163-174. Zaremba, A. and Żmudziński, R. (2014). The Low Price Effect on the Polish Market. Financial 22 Internet Quarterly „e-Finanse”, 10(1), pp. 69-85.

Call for papers

Call for papers is permanently open for articles across all the research areas.

tel.: +420 549 494 683 | e-mail:
© Copyright 2010–13 IFT