The impact of tick size on intraday stock price behavior: evidence from the Taiwan Stock Exchange

Ke, Mei-Chu; Jiang, Ching‐Hai; Huang, Yu-Hsi

doi:10.1016/s0927-538x(03)00019-2

Cited by 29 publications

(20 citation statements)

References 22 publications

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“…Using data from the TWSE, they found that autocorrelation was higher around market opening. Similarly, using data from the TWSE, Ke et al (2004) found that return volatility and autocorrelation were higher surrounding the opening of the TWSE.…”

Section: Literature Reviewmentioning

confidence: 89%

“…Foster and Viswanathan (1990) suggested that informed traders who acquired private information in the non-trading period tended to trade more aggressively if they believed private information would become public information quickly. Hence, higher return volatility (e.g., Foster and Viswanathan, 1993;and Ke et al, 2004) and more positive autocorrelation (e.g., Rhee and Wang, 1997;and Ke et al, 2004) occur around the market opening. Despite the vast literature on the relationship between extended futures returns and overnight stock returns, there is little research on the impact of the extended opening session of the futures market on the intraday patterns of stock prices surrounding the stock market opening.…”

Section: Introductionmentioning

confidence: 99%

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The Extended Opening Session of the Futures Market and Stock Price Behavior: Evidence from the Taiwan Stock Exchange

Lee

Chien

Chen

et al. 2009

Rev. Pac. Basin Finan. Mark. Pol.

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This paper examines how the introduction of the extended opening session of the futures market affects stock price behavior around the market opening. On January 1, 2001, the Taiwan Futures Exchange (TAIFEX) extended the trading hours by opening earlier 15 minutes than the Taiwan Stock Exchange (TWSE). This change presents an opportunity to analyze how the extended opening session * Corresponding author. 403 Rev. Pac. Basin Finan. Mark. Pol. 2009.12:403-416. Downloaded from www.worldscientific.com by UNIVERSITY OF CALIFORNIA @ SAN DIEGO on 06/04/15. For personal use only. 404 • Hsiu-Chuan Lee et al. of futures market affects stock price behavior. Compared with the pre-extension period, the empirical results show that stock returns are less volatile and return autocorrelations are less positively correlated around the stock market opening. Moreover, overreaction for opening prices of the stock market is mitigated in the post-extension period. Finally, unexpected futures returns during the extended opening session can predict overnight stock returns. Overall, the empirical results are consistent with Foster and Viswanathan (1990) in that informed traders will trade aggressively at the market opening.

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Section: Literature Reviewmentioning

confidence: 89%

Section: Introductionmentioning

confidence: 99%

The Extended Opening Session of the Futures Market and Stock Price Behavior: Evidence from the Taiwan Stock Exchange

Lee

Chien

Chen

et al. 2009

Rev. Pac. Basin Finan. Mark. Pol.

Self Cite

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show abstract

“…Hau (2006) shows that a larger tick size increases the costs of speculation 4 and overall stock return volatility. Ke et al (2004) show that the tick size is more binding on volatility in the middle of the trading day and Jiang et al (2009) show that the effect of tick size on volatility is more pronounced on dealer markets rather than on limit order markets. Münnix et al (2010) demonstrate the minimum tick size has a wider impact on the microstructure of financial returns.…”

Section: Tick Size Changes and Volatilitymentioning

confidence: 95%

One size fits all? High frequency trading, tick size changes and the implications for exchanges: market quality and market structure considerations

Verousis

Perotti

Sermpinis

2017

Rev Quant Finan Acc

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This paper offers a systematic review of the empirical literature on the implications of tick size changes for exchanges. Our focus is twofold: first, we are concerned with the market quality implications of a change in the minimum tick size. Second, we are interested in the implications of changes in the minimum tick size on market structure. We show that there is a large body of empirical literature that documents a decrease in transaction costs following a decrease in the minimum tick size. However, even though market liquidity increases, the incentive to provide market making activities decreases. We document a strong link between the minimum tick size regulations and the recent increase in high frequency trading activity. A smaller tick enhances the price discovery process. However, the question of how multiple tick size regimes affect market liquidity in a fragmented market remains to be answered. Finally, we identify topics for future research; we discuss the empirical literature on the minimum trade unit and the recent calls for a minimum resting time for quotes.

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“…Ke, Jiang, and Huang (2004) The empirical results shown in Table II indicate that the absolute price change in the last five minutes of expiration days is 0.338%; in other words, the abnormal price effects over and above the bid-ask bounce caused by the unwinding of index arbitrage positions will be no greater than 0.1% (0.338-0.25). This result concurs with that of Stoll and Whaley (1987), showing that despite Stoll and Whaley (1987).…”

Section: Abnormal Price Reversalsmentioning

confidence: 97%

Expiration‐day effects on individual stocks and the overall market: Evidence from Taiwan

Hsieh

2009

Journal of Futures Markets

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On expiration days of the MSCI-TW index futures, the Taiwan spot market is associated with abnormally large volume and high index volatility, along with mild index reversal. The effects concentrate only in the last five minutes of expiration days and appear to be strengthened by the adoption a call auction closing procedure by the Taiwan Stock Exchange. Individual index stocks show high volatility and strong tendency of price reversal, with large-and small-cap stocks being affected more than the medium-sized stocks. The highest-weighted stocks exhibit excessive volume and volatility, which is disproportionate to the impact on all other index stocks, indicating that the expiration-day effects may have been amplified by the attempt of price manipulation using large-cap stocks.

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The impact of tick size on intraday stock price behavior: evidence from the Taiwan Stock Exchange

Cited by 29 publications

References 22 publications

The Extended Opening Session of the Futures Market and Stock Price Behavior: Evidence from the Taiwan Stock Exchange

The Extended Opening Session of the Futures Market and Stock Price Behavior: Evidence from the Taiwan Stock Exchange

One size fits all? High frequency trading, tick size changes and the implications for exchanges: market quality and market structure considerations

Expiration‐day effects on individual stocks and the overall market: Evidence from Taiwan

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