Analysis of the impact of tick size on price changes
DOI:
https://doi.org/10.52731/lbds.003.131Abstract
In this study, we investigated the effect of tick size using the data of the Tokyo Stock Exchange. Tick size refers to the price that an investor can specify when buying or selling a stock. By changing this, stock exchanges aim to realize a desirable market for investors. We used a discontinuous regression design for the analysis and investigated the effect of tick size on two indices, High Low Range and Liquidity Index. As a result of the analysis, for both indicators, the liquidity is deteriorating when the tick size is large. This suggests that the method implemented by the Tokyo Stock Exchange in 2014 to reduce the tick size may be the desired result. In addition, this research spans multiple fields such as finance, information communication, and decision making.
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