Tick Size, Share Prices, and Stock Splits

Angel, James J.

doi:10.2307/2329494

Cited by 135 publications

(93 citation statements)

References 36 publications

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“…According to this theory, without these specialists, the intraday pattern of spread could be flat and keep narrow. The relative spread (Note 7) in our sample (0.271%) is lower compared with the results of Angel (1997), in which the relative bid-ask spread median is calculated to equal 0.65% for major market indices of fifteen countries. The mean of volatility for five stocks on the ASX market is 0.747, while the value on Swiss market is 0.482, as surveyed by Ranaldo (2004).…”

Section: Descriptive Statisticscontrasting

confidence: 76%

Order Aggressiveness on the ASX Market

Xu¹

2009

IJEF

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This paper investigates how traders on the Australian Stock Exchange (ASX) market make their joint decision on price aggressiveness and quantity when they submit an order, based on information from limit order book and stock price movement. We use a simultaneous-equation system including an Ordered Probit model to account for the discrete nature of price aggressiveness and an OLS model to fit the continuous quantity. The results suggest a negative trade-off between price aggressiveness and quantity. Factors such as depths at the best quotes, bid-ask spread, volatility and price changes are major determinants of the traders' order submission decision. This paper also provides evidence for a U-shaped intraday pattern of order flows and positive serial correlation in order type.

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Section: Descriptive Statisticscontrasting

confidence: 76%

Order Aggressiveness on the ASX Market

Xu¹

2009

IJEF

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“…Others discuss the existence of an optimal tick size. Angel (1997) and Anshuman and Kalay (2002) both conclude that the optimal tick size must minimize investors' trading costs. But while Angel's model indicates that the optimal tick size is an increasing function of firms' market values and idiosyncratic risks, Anshuman and Kalay (2002) focus on the trade-off between adverse selection and discreteness related costs.…”

Section: The Significance Of Tick Sizementioning

confidence: 99%

“…Angel (1997) and Anshuman and Kalay (2002) note that a tick size that is too small may not be sufficient to compensate liquidity provision in presence of informed traders. Seppi (1997) and Cordella and Foucault (1999) produce models to convey these concerns and show that the optimal tick size should not be zero.…”

Section: Introductionmentioning

confidence: 99%

Tick size change on the Stock Exchange of Thailand

Pavabutr

Prangwattananon

2008

Rev Quant Finan Acc

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This paper explores the impact of exogenous tick size reduction on bid-ask spreads, depths, and trading volume on the Stock Exchange of Thailand (SET). On November 5, 2001, the SET implemented tick size reduction on stocks below THB 25. Even though trading on the Thai Exchange is largely dominated by retail investors, the tick reduction produces similar empirical results found in markets where institutional investors are more dominant. Tick reduction on the SET is associated with declines in spreads, quoted and accumulated market depths. The study finds no significant change in trading volume of the affected stock group. *Corresponding author: School of Business, Thammasat University, Bangkok 10200, Tel: +662-225-2107 Email: pantisa@tu.ac.th Tick Size Change on the Stock Exchange of Thailand January 31, 2008 AbstractThis paper explores the impact of exogenous tick size reduction on bid-ask spreads, depths, and trading volume on the Stock Exchange of Thailand (SET). On November 5, 2001, the SET implemented tick size reduction on stocks below THB 25. Even though trading on the Thai Exchange is largely dominated by retail investors, the tick reduction produces similar empirical results found in markets where institutional investors are more dominant. Tick reduction on the SET is associated with declines in spreads, quoted and accumulated market depths. The study finds no significant change in trading volume of the affected stock group.

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“…Studies in this area have shown that increasing the tick size (1) leads to an increase in market making profits and hence to an increase in liquidity supply by the latter (Bollen et al 2003) and Anshuman and Kalay 1998) and (2) helps market makers to recover fixed costs. At the same time, Angel (1997) shows that in a large tick regime, investors are able to supply liquidity by placing limit orders. In Table 3, Panel C, we conclude this section by presenting the studies concerned with the general implications of a minimum tick on market making activities.…”

Section: Tick Size Changes and Market Liquiditymentioning

confidence: 99%

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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Tick Size, Share Prices, and Stock Splits

Cited by 135 publications

References 36 publications

Order Aggressiveness on the ASX Market

Order Aggressiveness on the ASX Market

Tick size change on the Stock Exchange of Thailand

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

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