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Does tick size influence high-frequency herding? Evidence from the Japanese equity market

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  • Zhu, Hongyu
  • Yamamoto, Ryuichi
  • Xiao, Xijuan
  • Li, Qin

Abstract

We investigated high-frequency herding in TOPIX 100 index constituent stocks and examined the effect of tick size on herding before and after tick size reduction. Before the reduction, we found that high-frequency herding exists, and its intensity increases with the extent to which the tick size constrains quoted spreads. High-frequency herding is more pronounced during periods of low market trading volume, market volatility, and idiosyncratic volatility, whereas the effect of the tick size on herding through binding constraints on quoted spreads becomes stronger during periods of high market trading volume, market volatility, and idiosyncratic volatility. Moreover, herding exhibits intraday variation and appears weaker earlier in the trading day. Following the reduction, high-frequency herding becomes less pronounced, and the effect of tick size on herding diminishes, as smaller tick sizes are less frequently a binding constraint on quoted spreads. Notably, the price impact of high-frequency herding tends to reverse over time, suggesting that herding is mainly non-information-driven.

Suggested Citation

  • Zhu, Hongyu & Yamamoto, Ryuichi & Xiao, Xijuan & Li, Qin, 2026. "Does tick size influence high-frequency herding? Evidence from the Japanese equity market," Pacific-Basin Finance Journal, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:pacfin:v:99:y:2026:i:c:s0927538x2600199x
    DOI: 10.1016/j.pacfin.2026.103253
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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