Altering Tick Sizes, Liquidity, and Stock Return in Indonesia

sung suk kim

Abstract


This study aimed to investigate the effect of tick-size altering on liquidity and stock return using the 2000-2018 Indonesia stock market (IDX) data. IDX was used to alter the tick size regime five times during the sample period. The results showed that a decrease in absolute tick size increases the liquidity estimated by the effective spread. The zero-return transaction frequency decreases consistently with a decrease in absolute tick size. The size also negatively impacts the abnormal stock return. Therefore, Fama-MacBeth approaches using individual firms' data show consistent results as the time series methods after controlling characteristic factors.


Keywords


tick size, liquidity, stock return

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References


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DOI: https://doi.org/10.26905/jkdp.v26i2.7402

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Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

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

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