The effect of five price categories in tick size policy on trade and stock returns based on the LQ45 Index

Nurlaila Firdani Fajri, Hermanto Siregar, Ferry Syarifuddin

Abstract


The capital market has an influential role in the national economy of countries, including Indonesia. The capital market in Indonesia is regulated by the Indonesia Stock Exchange (IDX) with the new regulation number Kep-00113/BEI/12-2016 that focuses on five price categories of tick size. This study aimed to investigate the impact of five price categories in tick size policy on liquidity and volatility based on the LQ45 index and examine factors that influence stock return. This study was performed using a paired sample T-test and panel regression test. The result of the different test indicates a significant change in bid-ask spread, Depth, Depth to relative spread (DRS), volume, and volatility. The five price category in the tick size policy does not affect the depth. It is found that all the variables have a smaller value after the implementation of the tick size policy. The results of the panel regression test show that depth, volume, and volatility have a significant influence on stock returns, while the bid-ask spread, and DRS does not affect stock returns. The result of this study was expected to improve understanding of the tick size regulation to determine the best stock investment strategy.

JEL Classification: G11, G12, G23, R53

DOI: https://doi.org/10.26905/jkdp.v23i1.2598


Keywords


Five Price Categories; Liquidity; LQ45 Index; Stock Return; Tick Size Policy; Volatility

Full Text:

PDF

References


Adesina, K. S. (2013). Modeling stock market return volatility: GARCH evidence from Nigerian Stock Exchange. International Journal of Financial Management, 3(3), 37-46.

Ahn, H.-J., Cao, C. Q., & Choe, H. (1996). Tick size, spread, and volume. Journal of Financial Intermediation 5, 2–22. https://doi.org/10.1006/jfin.1996.0002

Anggraeni, N. L. P. N., Wiksuana, I. B., & Wiagustini, L. P. (2016). Kondisi Bursa Efek Indonesia akibat penetapan surat keputusan direksi Bursa Efek Indonesia nomor Kep-00071/BEI/11-2013. E-Jurnal Ekonomi dan Bisnis Universitas Udayana, 5(7), 2037-2062.

Baharuddin, D., Bujang, I., & Hassan, H. (2018). The impact of reducing tick size on Malaysian’s stock market liquidity. Business Research International, 1(1), 145-156. https://doi.org/10.1007/978-981-10-6053-3_14

Bursa Efek Indonesia. (2016). Peraturan Perdagangan Efek Bersifat Ekuitas. http://www.idx.co.id/id-id/beranda/peraturan/peraturanperdagangan.aspx.

Ekaputra, I. A., & Asikin, E. S. (2012). Impact of tick size reduction on small caps price efficiency and execution cost on the Indonesia Stock Exchange. Asian Academy of Management Journal of Accounting and Finance, 8(1), 1-12.

Harris, L. E. (1994). Minimum price variations, discrete bid-ask spreads, and quotation sizes. The Review of Financial Studies Spring, 7(1), 149-178. https://doi.org/10.1093/rfs/7.1.149

Harris, L. (2003). Trading and Exchanges: Market Microstructure for Practioners. London: Oxford University Press.

Jonsson, E., & Welander, J. (2012). Tick size and stock market volatility: A regression discontinuity approach. Thesis. Stockholm School of Economics.

Krishnan, R., & Mishra, V. (2013). Intraday liquidity pattern in Indian Stock Market. Journal of Asian Economics, 28, 99-114. https://doi.org/10.1016/j.asieco.2013.05.005

Megginson, W. (1996). Corporate Finance Theory. Wesley: Addison.

Nurhayati, I. (2016). Friksi Perdagangan Konsep dan Kajian Empiris. Bogor: UIKA Press.

Pan, W., Song, F. M., & Tao, L. (2012). The effect of tick size reduction on the liquidity in a pure limit order market: Evidence from Hong Kong. Applied Economic Letters, 19(16), 1639-1642. https://doi.org/10.1080/13504851.2011.650327

Ronen, T., & Weaver, D. G. (1998). The effect of tick size on volatility, trader behavior, and market quality. Working Paper. Rutgers University.

Satiari F. (2009). Analisis perbedaan sistem fraksi harga saham terhadap variabel bid ask spread, depth, dan volume perdagangan (Studi pada fraksi harga Rp10, Rp25, Rp50 di Bursa Efek Indonesia). Thesis. Universitas Diponegoro Semarang.

Santoso, S. (2010). Statistik Parametrik, Konsep, dan Aplikasi dengan SPSS. Jakarta: PT. Elex Media Komputindo.

Setyawasih, R. (2011). Dampak penurunan tick size terhadap kualitas pasar dan determinan likuiditas pasar di Bursa Efek Indonesia (Studi kasus tick size Rp100,- untuk saham dengan harga kurang dari Rp 200,-). Jurnal Ilmiah Ekonomi Manajemen dan Kewirausahaan “Optimal”, 5(1), 1-22.

Sutyanto, D., Nuryartono, N., & Andati, T. (2015). Analysis of the effect of tick size simplication to trade and stock return in Indonesia stock exchange. Finance and Banking Journal, 17(1), 24-39.

Sutyanto, D. N. (2015). Analisis pengaruh penyederhanaan fraksi harga saham terhadap perdagangan dan return saham di Bursa Efek Indonesia. Thesis. Institut Pertanian Bogor.

Shook. (2002). Kamus Lengkap Wallstreet. Jakarta: Erlangga.




DOI: https://doi.org/10.26905/jkdp.v23i1.2598

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 813-3180-1534
Email: jkp@unmer.ac.id

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0