Tick size, liquidity for small and large orders, and price informativeness: Evidence from the Tick Size Pilot Program

Does Algorithmic Trading Affect Analyst Research Production?

“…These additional tests provide further support to the negative relation between AT and analyst research production and suggest that our comparable tests for the main sample are not affected by endogeneity. Our results help explain the evidence in Chung et al (2020) and Lee and Watts (2020) on an improvement in price efficiency for treated stocks as at least some of the private information discovery is channeled through analyst reports. 31…”

“…Specifically, there could be a mechanical correlation between the interaction term Post×Treatment and a measure of treated firms' idiosyncratic volatility that can produce spurious results in Chen et al (2021). Lower AT in treated stocks associates with less price discovery and less market-wide information being reflected in stock prices (see Table 8, Lee and Watts, 2020), which should associate with higher idiosyncratic volatility (see Table 8 in Chung et al 2020). Counter to prior research, e.g., Table 6 in O'Brien and Bhushan (1990), Chen et al (2021) report that idiosyncratic volatility is a strong positive predictor of higher coverage in treated firms, but we suspect this result captures higher coverage of treated firms that experience an increase in idiosyncratic volatility due to lower AT.…”

Preopening price indications and market quality: Evidence from NYSE Rule 48

“…Interestingly, these figures are comparable to the effects of the recent SEC Tick Size Pilot Program on the quoted and effective spreads and the price impact of a trade. Chung et al (2020) show that the pilot program increases the quoted and effective spreads by 15 basis points and the price impact of a trade by 8.6 basis points.…”

Predictive and Contemporaneous Power of the Determinants of Stock Liquidity

“…They have been studied in the form of investor attention, media coverage, and episodes of sensational news exogenous to the market (Aouadi et al, 2018 ; Peress and Schmidt, 2020 ; Shyu et al, 2020 ; Cheng et al, 2021 ). Market structure reforms, such as state ownership transformation and tick size pilot programs, are still popular determinants of stock liquidity (Boubakri et al, 2020 ; Chung et al, 2020 ). Research has been conducted on the determinants of stock liquidity from very fresh perspectives, such as lawyer CEOs, mandatory CSR expenditure, as well as oil supply and demand shocks (Pham, 2020 ; Roy et al, 2022 ; Zhang and Wong, 2022 ).…”