Does better liquidity for large orders attract institutional investors and analysts? Evidence from the Tick Size Pilot Program

Mengdie Deng, Tse-Chun Lin and Jiayu Zhou

Journal of Financial Markets, 2024, vol. 67, issue C

Abstract: Based on the SEC's Tick Size Pilot Program, we adopt a difference-in-differences design and find that the improved liquidity for large orders increases their ownership of the treatment firms with a larger tick size during the program. The effect is concentrated among firms with lower liquidity for large orders ex ante and mainly comes from dedicated investors and quasi-indexers. We also find that analyst coverage and forecast accuracy increase for the treatment firms, plausibly catering to the increased information demand of institutional investors. Consequently, price efficiency increases as well. Overall, we show the bright side of this controversial program.

Keywords: Tick size pilot program; Institutional investors; Liquidity for large orders; Analyst coverage; Forecast accuracy (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 G18 G23 M41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:67:y:2024:i:c:s138641812300068x

DOI: 10.1016/j.finmar.2023.100870

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