Work

The Impact of Minimum Trading Units on Stock Value and Price Volatility

Year: 2003

Type: article

Abstract: We study how minimum trading unit changes on the Tel-Aviv Stock Exchange impact stock trading activity, price volatility and value. The value effects are consistent with Merton (1987)'s model, that is an increase in the investor base (trading volume) and a decrease in price noisiness affect stock value positively. Our results extend Amihud Mendelson and Uno (1999)'s tests of Melson (1987) by demonstrating a clear relation between price noisiness changes and stock value changes, and by showing that the response to a minimum trading unit decrease becomes less favorable (and arguably even negative) in the thinnest trading stocks.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.2307/4126732

Authors: Shmuel Hauser, Beni Lauterbach

Institutions: Ben-Gurion University of the Negev, Bar-Ilan University, European Corporate Governance Institute

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3122568352

FWCI: 3.853

Cites: 19

Cited by: 28

Related to: 10