Topic
Tick size
About: Tick size is a research topic. Over the lifetime, 501 publications have been published within this topic receiving 20317 citations.
Papers published on a yearly basis
Papers
TL;DR: In this paper, the authors evaluate alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data and identify two serious potential problems with this method, namely, that quotes are often recorded ahead of the trade that triggered them and that trades inside the spread are not readily classifiable.
Abstract: This paper evaluates alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data. We document two potential problems with quote-based methods of trade classification: quotes may be recorded ahead of trades that triggered them, and trades inside the spread are not readily classifiable. These problems are analyzed in the context of the interaction between exchange floor agents. We then propose and test relatively simple procedures for improving trade classifications. THE INCREASING AVAILABILITY OF intraday trade and quote data is opening new frontiers for financial market research. The improved ability to discern whether a trade was a buy order or a sell order is of particular importance. In Hasbrouck (1988), the classification of trades as buys or sells is used to test asymmetric-information and inventory-control theories of specialist behavior. In Blume, MacKinlay, and Terker (1989), a buy-sell classification is used to measure order imbalance in tests of breakdowns in the linkage between S&P stocks and non-S&P stocks during the crash of October, 1987. In Harris (1989), an increase in the ratio of buys to sells is used to explain the anomalous behavior of closing prices. In Lee (1990), the imbalance in buy-sell orders is used to measure the market response to an information event. In Holthausen, Leftwich, and Mayers (1987), a buy-sell classification is used to examine the differential effect of buyer-initiated and seller-initiated block trades. Most past studies have classified trades as buys or sells by comparing the trade price to the quote prices in effect at the time of the trade. In this paper, we identify two serious potential problems with this method, namely, that quotes are often recorded ahead of the trade that triggered them, and that
3,641 citations
TL;DR: The difference in execution costs between NASDAQ and NYSE stocks is not due to adverse information, in market depth, or in the frequency of even-eighth quotes, but rather due to internalization and preferencing of order flow and the presence of alternative interdealer trading systems.
1,252 citations
TL;DR: In this paper, the authors find that short-horizon return predictability from order flows is an inverse indicator of market efficiency, and that such predictability is diminished when bid-ask spreads are narrower, and has declined over time with the minimum tick size.
851 citations
TL;DR: In this article, a cross-sectional discrete spread model is estimated by using intraday stock quotation spread frequencies, and the results are used to project $1/16 spread usage frequencies given a $ 1/16 tick.
Abstract: Exchange minimum price variation regulations create discrete bid-ask spreads. If the minimum quotable spread exceeds the spread that otherwise would be quoted, spreads will be wide and the number of shares offered at the bid and ask may be large. A cross-sectional discrete spread model is estimated by using intraday stock quotation spread frequencies. The results are used to project $1/16 spread usage frequencies given a $1/16 tick. Projected changes in quotation sizes and in trade volumes are obtained from regression models. For stocks priced under $10, the models predict spreads would decrease 38 percent, quotation sizes would decrease 16 percent, and daily volume would increase 34 percent. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
757 citations
TL;DR: In this paper, an econometric model of stock price clustering was derived and estimated, and it was shown that traders would frequently use odd sixteenths when trading low-price stocks, if exchange regulations permitted trading on sixteenth's.
Abstract: Stock prices cluster on round fractions. Clustering increases with price level and volatility, and decreases with capitalization and transaction frequency. Clustering is pervasive. Price clustering will occur if traders use discrete price sets to simplify their negotiations. Exchange regulations require that most stocks be traded on eighths. Clustering on larger fractions will occur if traders choose to use discrete price sets based on quarters, halves, or whole numbers. An econometric model of clustering is derived and estimated. Projections from the results suggest that traders would frequently use odd sixteenths when trading low-price stocks, if exchange regulations permitted trading on sixteenths. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
649 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2025 | 3 |
| 2024 | 5 |
| 2023 | 9 |
| 2022 | 21 |
| 2021 | 24 |
| 2020 | 25 |