Allaudeen Hameed1, Eric Terry1
1Department of Finance and Accounting, The National University of Singapore, 10 Kent Ridge Crescent, Singapore 119260
Tóm tắt
Proposals have been made for some stock exchanges to reduce the size of their trading tick in order to lower transactions costs and, as a result, attract more trading volume and firm listings. We investigate the impact of tick size on price clustering and trading volume when the minimum price change varies with price level. Controlling the firm specific variables, we find that a smaller trading tick tends to exacerbate price clustering. Furthermore, a reduction in tick size is more likely to increase trading volume if the shares are heavily traded. These results suggest that previous studies on other stock markets may have overstated the benefits of a smaller trading tick to traders.
