TY - JOUR
T1 - The Impact of Minimum Trading Units on Stock Value and Price Volatility
AU - Hauser, Shmuel
AU - Lauterbach, Beni
PY - 2003/9
Y1 - 2003/9
N2 - We study how minimum trading unit changes on the Tel-Aviv Stock Exchange impact a stock's trading activity, price volatility, and value. The value effects are consistent with Merlon's (1987) model, i.e., an increase in the investor base (trading volume) and a decrease in price noisiness affect stock value positively. Our results extend Amihud, Mendelson, and Uno's (1999) tests of Merton by demonstrating a clear relation between price noisiness changes and stock value changes, and by showing that the response to a minimum trading unit decrease becomes less favorable (and arguably even negative) in the thinnest trading stocks.
AB - We study how minimum trading unit changes on the Tel-Aviv Stock Exchange impact a stock's trading activity, price volatility, and value. The value effects are consistent with Merlon's (1987) model, i.e., an increase in the investor base (trading volume) and a decrease in price noisiness affect stock value positively. Our results extend Amihud, Mendelson, and Uno's (1999) tests of Merton by demonstrating a clear relation between price noisiness changes and stock value changes, and by showing that the response to a minimum trading unit decrease becomes less favorable (and arguably even negative) in the thinnest trading stocks.
UR - http://www.scopus.com/inward/record.url?scp=0141685787&partnerID=8YFLogxK
U2 - 10.2307/4126732
DO - 10.2307/4126732
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AN - SCOPUS:0141685787
SN - 0022-1090
VL - 38
SP - 575
EP - 589
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 3
ER -