The Impact of The Tick Size Reduction on Liquidity : Empirical Evidence From Jakarta Stock Exchange  

Oleh:

Tandelilin, Eduardus ; Purwoto, Lukas

Jenis: Article from Journal - ilmiah nasional - tidak terakreditasi DIKTI
Dalam koleksi: International Journal of Business vol. 6 no. 2 (May 2004), page 225-250.
Topik: reduction; jakarta stock exchange; liquidity; tick size

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: II51.3 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

Only july 3, 2000, the jakarta stock exchange (JSX) reduced its tick size from Rp. 25,00 to Rp. 5,00. This study examines the impact of the tick size reduction on the JSX bid - ask spread market depth, and trading activity. Using daily data, this study finds that the rupiah spread, percentae spread, and depth decreased significanlty. All of these findings aer not surprising since they are consistent with previous studies conducted in several different markets. In contrast to previous studesm this study finds that the key varibale in determining the difference in perfromance of JSX stocks following the tick size reduction is the price of the stock. Specifically, all the trading activity measures e. g. in the number of trades share volume and rupiah volume, increased for low - priced stocks. Conversely, trading activity decreased for high - priced stocks. The possible explanation is that obsolute tick size Rp. 5,00 is too small economic terms of JSX high - priced stocks, so those decrease the investors' willingness to trade.

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