Search results for "Tick size"
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How Tick Size Affects the High Frequency Scaling of Stock Return Distributions
2014
We study the high frequency scaling of the distributions of returns for stocks traded at NASDAQ market as a function of the tick-to-price ratio. The tick-to-price ratio is a measure of an effective tick size. We find dramatic differences between distributions for assets with large and small tick-to-price ratio. The presence of returns clustering is evident for large tick size assets. The statistical differences between large and small tick size assets appear to reduce at higher time scales of observation. A possible way to explain returns dynamics for large tick size assets is the coupling of returns with bid-ask spread dynamics. A simple Markov- switching model is able to reproduce the pro…
Tick Size and Price Diffusion
2011
A tick size is the smallest increment of a security price. Tick size is typically regulated by the exchange where the security is traded and it may be modified either because the exchange enforces an overall tick size change or because the price of the security is too low or too high. There is an extensive literature, partially reviewed in Sect. 2 of the present paper, on the role of tick size in the price formation process. However, the role and the importance of tick size has not been yet fully understood, as testified, for example, by a recent document of the Committee of European Securities Regulators (CESR) [1].