The information content of the thinner order book following tick size reduction Evidence from the Taiwan Stock Exchange

摘要

Purpose - This paper aims to examine the impact of a reduction in tick size on the information content of the order book by using data from the Taiwan Stock Exchange (TWSE). Design/methodology/approach - To estimate the information content of the order book, the modified information share proposed by Hasbrouck and extended by Lien and Shrestha is used in this paper. Findings - The empirical results show that the limit order book is informative. Furthermore, the results indicate that a reduction in tick size will decrease the information content of the order book and the decrease in the information content of the order book is positively related to the thinner order book. Originality/value - This paper suggests that, in order to enhance the information content of the order book, the TWSE should disclose the full limit order book.