 Timing of tick size reduction: Threshold and smooth transition model analysisHiroyuki Maruyama and Tomoaki Tabata Finance Research Letters, 2022, vol. 45, issue C Abstract: “Tick size” is the minimum subdivision of price at which investors can buy or sell an asset in a financial market. Tick size is reduced to improve market quality and liquidity. This study analyzes the volume dimension of liquidity—specifically, trading volume—to determine the time of impact of the 2014 tick size reduction policy, implemented in two phases (P1 and P2) by the Tokyo Stock Exchange. Threshold autoregressive (TAR) and logistic smooth transition autoregressive (LSTAR) models are used to estimate this time of impact. The results show that the use of the TAR model changed the trading volumes for P1 and P2 on December 13, 2013, and June 30, 2014, respectively. With the addition of the LSTAR model, the trading volumes of P1 and P2 changed on December 16, 2013, and September 3, 2014, respectively. These results suggest that empirical studies on tick size reduction need longer interruptions. Keywords: Tick size reduction; Tokyo stock exchange; Liquidity; Trading volume; Threshold autoregressive model; Logistic smooth transition autoregressive model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002233 DOI: 10.1016/j.frl.2021.102142 Access Statistics for this article Finance Research Letters is currently edited by R. Gençay More articles in Finance Research Letters from Elsevier |
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