The effects of a tick-size reduction on the liquidity in a pure limit order market: evidence from Hong Kong

摘要

This study empirically investigates the effects of a tick-size reduction on the liquidity of the Hong Kong stock market, a pure limit order market. By using a modified cumulative depth to measure liquidity, we find that overall liquidity for liquid stocks is significantly decreased after the tick-size reduction, which implies that the tick-size reduction probably increases the transaction costs of large institutions. Furthermore, the results show that trading sizes in high-volume stocks are decreased, probably because large institutional traders use smaller size transactions to hedge the adverse effect caused by the decreased liquidity.View full textDownload full textKeywordstick-size reduction, liquidity, limit order marketJEL ClassificationG10, G12, G14Related var addthis_config = { ui_cobrand: "Taylor & Francis Online", services_compact: "citeulike,netvibes,twitter,technorati,delicious,linkedin,facebook,stumbleupon,digg,google,more", pubid: "ra-4dff56cd6bb1830b" }; Add to shortlist Link Permalink http://dx.doi.org/10.1080/13504851.2011.650327