An examination of minimum tick sizes on the Tokyo Stock Exchange

In setting a minimum tick size, exchanges balance the competing objectives of lowering transaction costs and encouraging liquidity provision by minimizing stepping-ahead risk. We examine the trade-off between these two types of costs by examining the proportion of time that the quoted spread equals the minimum tick size (PTIMEMIN). We undertake this analysis on the Tokyo Stock Exchange, a market that sets nine different tick sizes based on stock price. PTIMEMIN varies markedly across stocks, ranging from almost 0 to almost 100 percent. We find that trade size, the number of trades, and price are the most important determinants of whether the minimum tick size is a binding constraint. In fact, trade size and number of trades are more significant determinants of tick size constraint than price. Consequently, we argue that tick size should be set based on trading activity and price, rather than price alone.     

Tick size change and liquidity provision on the Tokyo Stock Exchange

The Tokyo Stock Exchange (TSE) introduced a change in its minimum tick sizes on April 13, 1998, for stocks traded at certain price ranges. We investigate the liquidity and market quality of the stocks affected by the tick size change, using a unique and comprehensive tick-by-tick data. We find that the quoted spread (effective spread) declined significantly by 20 to 50 percent (by 24 to 60 percent) after the tick size change. Reductions in spread are greater for firms with greater tick size reductions, greater trading activity, and higher transitory component in the bid–ask spread. Although investors are more aggressive in posting quotes, there is no definite evidence of an increase in trading volume. Overall, our evidence is consistent with the hypothesis that the minimum tick size creates economic rents for liquidity providers, which is lowered upon tick size reduction. J. Japanese Int. Economies 21 (2) (2007) 173–194.     

A Simulation model of the Taiwan security market

Since continuous trading and call systems are implemented by many stock exchanges, we conduct a simulation to evaluate stock market performance under different auction mechanisms. Our simulation ignoring confounding factors demonstrates that: (1) a continuous market incurs higher execution cost but with shorter liquidity time and better price discovery than a call market; and (2) as the stock market becomes thinner, execution cost rises and price discovery slows. (JELG15, CIS)     

Intraday liquidity patterns in Indian stock market

This paper is an empirical study of the intraday liquidity patterns on the National Stock Exchange (NSE) of India. Using trade and quotes data on stocks contained in the NIFTY index, we find that most of the volume and spread related to liquidity measures are U-shaped, similar to those found in a quote driven market. Such patterns also indicate a contradictory feature of concurrent high trading volume and wide spreads, a feature that is new to an order driven market such as the NSE. Additionally, this paper also measures marketwise liquidity by checking for commonality among liquidity measures. Empirical results show that there is only weak evidence of commonality, suggesting sensitivity to commonality need not be a priced risk.     

中国股票市场流动性价值研究——双重上市A、B股经验证据

本文首先利用流动性综合测度指标,将证券交易数量、证券流动性水平及证券市场流动性水平引入到证券价格函数中,构建了证券价格差异的流动性模型,从流动性角度探讨证券价格溢价问题,在理论上证明了证券流动性价值的存在性。随后,本文利用A、B股股票实证分析证券流动性价值,实证结果表明,股票流动性水平与股票市场流动性水平可以解释A、B股价格差异,中国股票市场存在流动性价值,流动性价值受股票流动性水平、股票市场流动性水平以及股票交易数量影响。     

噪声交易与股票流动性:兼对“正(负)相关”理论的评析及“流动性黑洞”现象的解释

噪声交易与股票流动性都是行为金融研究的重点，但二者的相关性问题学界一直未能达成一致，"正负之争"不休。文章改进Kyle （1985）的假设，构建符合中国实际的流动性数理模型，模型表明：噪声交易与流动性负相关，且相关关系受信息不对称、风险厌恶度等因素的影响。进一步，文章以中国沪深300指数的成分股数据证实了"噪声交易-流动性"关系，发现其存在显著的月历效应和市场行情效应。文章对"正（负）相关"理论进行了梳理和评析，为争论的清晰化、明朗化做出贡献。     

机构交易行为与中国股市波动实证研究

本文采用2004年1月至2008年6月中国股票市场机构投资者的季度交易数据分析了机构交易与股票价格波动的相关关系。研究发现,机构投资者并非总是具有稳定股市的功能。机构交易对股价波动的影响随着投资者类型、股票市值和流动性水平、市场结构和环境的变化而变化。在"后股改"时代,市场将面临非流通股股本减持的巨大压力,政策制定部门应将机构与中小股东利益集合起来,针对不同市场情况机构买卖单产生的不同影响,制定公平有效的政策和监管机制。     

Institutional Investors' Trading in Speculation: Evidence from China

The trading behaviour of institutional investors has attracted much attention. However, many issues related to their trading behaviour cannot be addressed without high‐frequency changes in institutional ownership. Based on a measure of the trading behaviour of institutional investors by using an institutional account dataset from China, we find that (i) active institutions trade speculatively by taking advantage of individual investors; (ii) individuals buying high and selling low offer liquidity only on average; (iii) foreign investors do not show significant patterns in speculation; and (iv) trading of active institutions significantly affects price. This study casts doubt on the conventional wisdom that institutional or sophisticated investors improve market efficiency by correcting mispricing, and provides direct evidence for institutional investors' speculation behaviour and their destabilising effect on the stock market. Results suggest that regulators in emerging markets should monitor institutions' speculation to bring fairness and justice to the stock market.     

Market microstructure and price discovery on the Tokyo Stock Exchange

This paper compares the price discovery processes at the opening and closing transactions for the fifty largest stocks trading on the Tokyo Stock Exchange. Open-to-open returns are found to have a greater volatility and a more negative autocorrelation pattern than close-to-close returns, similar to the pattern we found on the New York Stock Exchange. The results are consistent with pricing over-reaction at the opening and partial price-adjustment at the close. These patterns persist over time and prevail when estimated for returns conditional on the contemporaneous market effect. Our analysis of daytime and overnight returns suggest that pricing errors at the opening are corrected over the trading day. We present a new measure of volatility — the relative dispersion of stock returns around the market return — and find that it is greater at the opening, consistent with a more noisy price discovery process.     

卖空限制对中国权证价格的影响

论文利用中国市场上特有的不允许卖空股票的制度,来实证检验“限制对j中”风险对于权证定价的影响。研究将中国权证市场的定价偏离分解为流动性溢价和动量性溢价（折价）。其中动量性溢价（折价）是市场泡沫的一种体现。研究爱现在权证泡沫出现期间,权证的换手率增高。另外,如果允许卖空,投资者将可以通过套利获取无风险收益。     

Turnover tax and trading volume: Panel analysis of stocks traded in the Japanese and US markets

Japan eliminated turnover tax on stock trading through the end of the 1990’s to revitalize its ailing stock market by reducing the overall transaction cost for stock trading. This paper empirically examines the effect of this exogenous, institutional change in tax policy on stock trading volume in the Japanese market. To do so, we use panel data of stocks traded in both the Japanese and United States markets and compare changes in their trading volumes at the times of the tax changes. We use a well-established V-shape relationship between turnover and price change, with three different assumptions as regards how the price change relates to turnover across stocks and markets. Although a model allowing for both slope and intercept shifts does not offer any indications one way or the other, a more restricted model allowing only for an intercept shift clearly suggests a statistically significant increase in trading volume in the Japanese market but not in the United States markets for April 1999. However, such a result was not obtained for April 1996. These results indicate that the abolition of turnover tax in 1999, but not the rate reduction in 1996, contributed to the trading volume increase.     

Financial Market Competition: The Effects of Transparency

European and US financial markets are faced with increased competition for order flow. Fundamental in the competition process is the organization of the trading process, since this directly influences the performance and trading costs of those markets. In this paper we examine the effects of public quote disclosure and the disclosure of transaction information on market liquidity and price efficiency. Our results indicate a clear trade-off between efficiency and liquidity. These findings could explain why a variety of co-existing trading structures can be optimal among competitive financial markets.     

Are REITs more resilient than non-REITs? Evidence from natural experiments

REITs draw attention from investors around the world, yet our understanding of the various risks associated with such securities is limited. Using the introduction of Arrowhead, a low-latency high-frequency trading platform, to the Tokyo Stock Exchange and the financial crisis of 2008 as natural experiments, we compare the resilience of REITs and equities in terms of liquidity and volatility. The results indicate that the introduction of Arrowhead improved the quality of the Japanese REIT market but also increased the probability of flash crashes. We also find that although the financial crisis significantly deteriorated overall equity market quality, the Japanese REIT market was resilient. Finally, using a difference-in-differences regression model, we show that the higher transparency and better price discovery of REITs, compared to non-REITS, protected them from the negative effects of the financial crisis and the introduction of Arrowhead. Overall, our analysis shows that REITs are more resilient than non-REITs.     

Trade-size clustering and price efficiency

Using a sample of 26 markets, this paper investigates if trade-size clustering affects price efficiency. Our results suggest that more clustering trades are associated with greater resemblance of a random walk, less pricing errors, and shorter price delays. Moreover, we examine three underlying mechanisms to explain how clustering improves efficiency. First, we show that clustering trades are informative, consistent with the idea that stealth traders leverage such tactics to convey private information to prices. Second, we discover that clustering trades are positively related to investor attention (stock liquidity), implying that informed clustering trades happen at the presence of enormous uninformed investors. High attention and liquid markets help reduce the trading friction, thereby prompting quick price adjustments to private information released by the stealth trading.     

The Persistence of Dominant‐Firm Market Share: Raising Rivals' Cost on the New York Stock Exchange

To explain the persistence of dominant New York Stock Exchange (NYSE) market share in stock trading of listed securities from 1992 to 2002, we develop a dominant‐firm price leadership model and hypothesize that NYSE specialists raised the costs of rival market makers. The model predicts that natural and induced cost advantages will determine the NYSE's market share vis‐à‐vis the regional exchanges, electronic trading systems, and NASDAQ dealers. Empirically, NYSE market share increases with economies of scale and scope, abnormal price volatility, high asymmetric information, and with trading practices that raise rivals' costs, such as failure to display limit orders that bettered the existing quotes.     

Intraday information efficiency on the Chinese equity market

Bid-ask spread is a direct measure of information asymmetry. As such, it can be used to evaluate information efficiency. In this paper, we show that both the quoted and effective spreads on the Shanghai Stock Exchange are extremely high at the open, decrease over the trading day, and experience a small rebound at the close. The spread decreases with share volume, daily trades, and market capitalization, but increases with average trade size. We further examine the beta using the unbiasedness regression from Biais et al. [Biais, B., Hillion, P., Spatt, C. (1999). Price discovery and learning during the pre-opening period in the Paris Bourse. Journal of Political Economy, 107, 1218–1248] and find that intraday prices are efficient and unbiased for more liquid stocks. This suggests that liquidity prompts information-motivated trading, which, in turn, improves information dissemination. Moreover, our findings indicate that small and medium trades are more likely to facilitate the formation of efficient prices at the open and close of the market, while large trades play a more important role during the other trading periods.     

中、美融资融券交易和监管规则比较分析

融资融券具有活跃证券市场、扩大市场规模、提高证券定价效率和投资者资金使用效率的作用。本文试以成熟市场的成功经验为借鉴,就国内交易所前期推出的相关办法可能存在的相关法律问题进行探讨,并给出相应的解决思路。     

人民币汇率与中国贸易平衡:基于汇改后数据的实证研究

本文运用计量方法考察汇率制度改革后贸易平衡价格弹性的变化和人民币升值对中国贸易平衡的影响.主要得到以下的结论:自2005年7月人民币汇率制度改革以来,我国贸易平衡的价格弹性显著增强,汇率的价格信号机制有所加强,表明汇率制度改革使人民币汇率更好地发挥对贸易收支的调节作用;人民币升值不能显著减少中国贸易顺差,但人民币升值会改变中国与不同贸易伙伴之间的贸易平衡关系;汇率制度改革后的人民币升值对工业制成品贸易的影响要大于对初级品贸易的影响.     

The Paris financial market in the nineteenth century: complementarities and competition in microstructures1

This article sets out to explain why the Paris Bourse was highly successful in the nineteenth century in spite of the supposedly inefficient monopoly of the official market, the Parquet. The literature argues that the official monopoly was sidelined by a free, innovative market known as the Coulisse, but it fails to explain how the Coulisse emerged despite the monopoly and how the two markets persisted alongside each other during the entire century. We provide a detailed history of how these two markets emerged and interacted. The Parquet increasingly developed as a high‐end market, providing security, transparency, and effective settlement‐delivery to unsophisticated investors trading on the spot market. The Coulisse provided liquidity, immediacy, and opacity to professional investors trading mostly forward. In line with recent theoretical developments, we argue that the juxtaposition of heterogeneous organizations had important virtues for market participants, since it allowed the exchanges to specialize in different investors and services and made the exchanges complementary to each other. We demonstrate our claim by looking at both the formal rules and the actual functioning of the Parquet, drawing on its archives which we have recently classified.     

The relationship between liquidity and returns on the Chinese stock market

The goal of this paper is to examine the impact of liquidity on returns on the Shanghai stock exchange (SHSE) and the Shenzhen stock exchange (SZSE). We proxy liquidity with the trading volume (TV), the turnover rate (TR), and the trading probability (TP). Using daily data for the period January 1997 and December 2003, we find mixed results on the relationship between liquidity and returns. There is greater evidence of liquidity having a negative effect on returns on the SHSE than on the SZSE. However, this evidence is not robust across the three proxies for liquidity that we use.