Tick size, spread, and volume

Hee Joon Ahn, Quanwei Cao, Hyuk Choe

Research output: Contribution to journalArticle

69 Citations (Scopus)

Abstract

The AMEX changed the tick size from $1/8 to $1/16 for low-price stocks on September 3, 1992. Consistent with the prediction of L. E. Harris (1994, Minimum price variations, discrete bid-ask spreads, and quotation sizes, Rev. Finan. Stud. 7, 149-178), the change has reduced both quoted and effective spreads, although the magnitude of the reduction is much smaller than predicted. However, we fail to find evidence of a significant increase in trading volume. Our cross-sectional regressions show that stocks with greater trading activity, lower prices, and stronger competition from the regional exchanges experienced greater spread reductions. Journal of Economic Literature Classification Numbers: G10, G18, G20.

Original languageEnglish (US)
Pages (from-to)2-22
Number of pages21
JournalJournal of Financial Intermediation
Volume5
Issue number1
DOIs
StatePublished - Jan 1 1996

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Tick size
Prediction
Trading activity
Stock prices
Trading volume
Bid/ask spread
Effective spread
Cross-sectional regression
Economics

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Ahn, Hee Joon ; Cao, Quanwei ; Choe, Hyuk. / Tick size, spread, and volume. In: Journal of Financial Intermediation. 1996 ; Vol. 5, No. 1. pp. 2-22.
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Tick size, spread, and volume. / Ahn, Hee Joon; Cao, Quanwei; Choe, Hyuk.

In: Journal of Financial Intermediation, Vol. 5, No. 1, 01.01.1996, p. 2-22.

Research output: Contribution to journalArticle

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