Price Discovery Process Before and After the Introduction of the “arrowhead” Trading System at the Tokyo Stock Exchange

Keiichi Kubota and Hitoshi Takehara
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Keiichi Kubota: Chuo University
Hitoshi Takehara: Waseda University

Chapter 6 in Reform and Price Discovery at the Tokyo Stock Exchange: From 1990 to 2012, 2015, pp 88-107 from Palgrave Macmillan

Abstract: Abstract In Chapter 6 we investigate the impact of the introduction of the arrowhead trading system introduced on January 4, 2010 at the Tokyo Stock Exchange (Tokyo Stock Exchange, 2014). As we study the analyses based on our two hypotheses, we find a twofold pattern in these changes, depending on the market size of stocks. That is, among large-cap stocks, trading costs dramatically decreased, most likely as a result of order slicing by institutional investors and HFTs. But among small-cap stocks, that change was not so large. When we look at asset pricing using the Fama and MacBeth test, we find that information asymmetry became a significant variable among large-cap stocks, whereas and the liquidity and/or trading cost effects are more pronounced among small-cap stocks.

Keywords: Stock Return; Information Asymmetry; Institutional Investor; Trading Cost; Trading System (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-54039-3_6

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DOI: 10.1057/9781137540393_6

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