The Impact of the Reduction in Tick Increments in Major U.S. Markets on Spreads, Depth, and Volatility
AbstractThis study presents an analysis of the impact of the introduction of quotes in sixteenths of a dollar on the AMEX, Nasdaq, and NYSE in mid-1997 on select market characteristics such as spreads, effective spreads, quoted depth, and volume. The findings of the study document reductions in the bid-ask spread, effective spread, and a statistically significant increase in the number of quotes. Interestingly, we find that liquidity, as measured by the total depth at the bid and ask, declines significantly on the AMEX and NYSE, but increases on the Nasdaq. Trading volume increases on the NYSE, but remains unchanged for the AMEX and Nasdaq. We also find that the proportion of even-increment quotes is a relevant factor affecting percentage spreads for Nasdaq both before and after and for the NYSE only after the change in quoting increments. Copyright 2000 by Kluwer Academic Publishers
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal Review of Quantitative Finance and Accounting.
Volume (Year): 15 (2000)
Issue (Month): 2 (September)
Contact details of provider:
Web page: http://springerlink.metapress.com/link.asp?id=102990
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Large, Jeremy, 2009.
"A market-clearing role for inefficiency on a limit order book,"
Journal of Financial Economics,
Elsevier, vol. 91(1), pages 102-117, January.
- Jeremy Large, 2006. "A Market-Clearing Role for Inefficiency on a Limit Order Book," Economics Papers 2006-W08, Economics Group, Nuffield College, University of Oxford.
- MacKinnon, Greg & Nemiroff, Howard, 2004. "Tick size and the returns to providing liquidity," International Review of Economics & Finance, Elsevier, vol. 13(1), pages 57-73.
- Battalio, Robert H. & Lerman, Alina & Livnat, Joshua & Mendenhall, Richard R., 2012. "Who, if anyone, reacts to accrual information?," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 205-224.
- Goldstein, Michael A. & A. Kavajecz, Kenneth, 2000.
"Eighths, sixteenths, and market depth: changes in tick size and liquidity provision on the NYSE,"
Journal of Financial Economics,
Elsevier, vol. 56(1), pages 125-149, April.
- Michael A. Goldstein & Kenneth A. Kavajecz, . "Eighths, Sixteenths and Market Depth: Changes in Tick Size and Liquidity Provision on the NYSE," Rodney L. White Center for Financial Research Working Papers 14-98, Wharton School Rodney L. White Center for Financial Research.
- Chung, Kee H. & Chuwonganant, Chairat, 2002. "Tick size and quote revisions on the NYSE," Journal of Financial Markets, Elsevier, vol. 5(4), pages 391-410, October.
- Ahn, Hee-Joon & Cai, Jun & Chan, Kalok & Hamao, Yasushi, 2007. "Tick size change and liquidity provision on the Tokyo Stock Exchange," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 173-194, June.
- Kee Chung & Jangkoo Kang & Joon-Seok Kim, 2011. "Tick size, market structure, and market quality," Review of Quantitative Finance and Accounting, Springer, vol. 36(1), pages 57-81, January.
- Bourghelle, David & Declerck, Fany, 2004. "Why markets should not necessarily reduce the tick size," Journal of Banking & Finance, Elsevier, vol. 28(2), pages 373-398, February.
- Chung, Kee H. & Van Ness, Robert A., 2001. "Order handling rules, tick size, and the intraday pattern of bid-ask spreads for Nasdaq stocks," Journal of Financial Markets, Elsevier, vol. 4(2), pages 143-161, April.
- Ke, Mei-Chu & Jiang, Ching-Hai & Huang, Yen-Sheng, 2004. "The impact of tick size on intraday stock price behavior: evidence from the Taiwan Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 12(1), pages 19-39, January.
- Loistl, Otto & Schossmann, Bernd & Veverka, Alexander, 2004. "Tick size and spreads: The case of Nasdaq's decimalization," European Journal of Operational Research, Elsevier, vol. 155(2), pages 317-334, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.