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The Effect of Reductions in Minimum Trading Units on Equity Premiums

Author

Listed:
  • Naoto Isaka

    (Meisei University)

  • Hiroshi Yoshikawa

    (Nomura Securities Company)

Abstract

We empirically examine the effect of reductions in Minimum Trading Units (MTUs) on equity premiums from October 2001 to March 2005 in the Japanese stock markets. We estimate weekly equity premiums around the MTU changes and find that (1) idiosyncratic risk was reflected in the equity premium before the MTU reductions, (2) the idiosyncratic risk premium significantly decreased after the MTU reductions, and (3) reductions in the idiosyncratic risk premium were associated with diversification of the risk caused by an increasing number of individual shareholders. These findings are also confirmed, in part, for a stock split sample.

Suggested Citation

  • Naoto Isaka & Hiroshi Yoshikawa, 2008. "The Effect of Reductions in Minimum Trading Units on Equity Premiums," Discussion Papers 10, Meisei University, School of Economics.
    • Handle: RePEc:mei:wpaper:10
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    Citations

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    Cited by:

    1. Yoshiaki Hoshino & Ryuichiro Ishikawa & Akira Yamazaki, 2013. "Unequal Distribution of Powers in a Wicksellian Transfer Game," Discussion Papers 24, Meisei University, School of Economics.
    2. Akira Yamazaki, 2013. "Production Atomless Economies," Discussion Papers 25, Meisei University, School of Economics.

    More about this item

    Keywords

    minimum trading units; stock splits; equity premium;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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