IDEAS home Printed from https://ideas.repec.org/a/jfr/ijfr11/v8y2017i1p79-98.html
   My bibliography  Save this article

Tick Size Reduction and the Components of the Bid-Ask Spread on the Taiwan Stock Exchange

Author

Listed:
  • Su-Wen Kuo

Abstract

We examined the effect of reduced tick size on spread and its various components on Taiwan Stock Exchange (TWSE). The TWSE stands for a representative order-driving call mechanism in the emerging market. The noticeable market features of the TWSE render our findings on the effect of tick-size changes useful in combination with those reported in studies on developed markets. Our evidence strongly indicated that the traded spread and the order-processing component declined after tick size was reduced, whereas the asymmetric information component exhibited less significant changes. We documented a relatively high proportion of the order-processing component of the TWSE compared with that observed in developed markets after tick size was reduced. The cross-sectional regression analysis results indicated that stocks with high binding constraints, a high price, and high trading activity generated substantial savings on the order-processing component after tick-size conversion. Our empirical results highlight the important contributions of reduced tick size on market efficiency specifically in an emerging call market setting.

Suggested Citation

  • Su-Wen Kuo, 2017. "Tick Size Reduction and the Components of the Bid-Ask Spread on the Taiwan Stock Exchange," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(1), pages 79-98, January.
    • Handle: RePEc:jfr:ijfr11:v:8:y:2017:i:1:p:79-98
    DOI: 10.5430/ijfr.v8n1p79
    as

    Download full text from publisher

    File URL: http://www.sciedu.ca/journal/index.php/ijfr/article/view/10801/6602
    Download Restriction: no
    File URL: http://www.sciedu.ca/journal/index.php/ijfr/article/view/10801
    Download Restriction: no
    File URL: https://libkey.io/10.5430/ijfr.v8n1p79?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jfr:ijfr11:v:8:y:2017:i:1:p:79-98. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gina Perry (email available below). General contact details of provider: http://ijfr.sciedupress.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.