The Impact of the Tick Size Reduction on Liquidity: Empirical Evidence from the Jakarta Stock Exchange
In contrast to previous studies, this study finds that the key variable in determining the difference in performance of JSX stocks following the tick size reduction is the price of the stock. Specifically, all the trading activity measures e.g. in the number of trades, share volume, and rupiah volume, increased for low-priced stocks. Conversely, trading activity decreased for high-priced stocks. The possible explanation is that absolute tick size Rp5.00 is too small in economic terms for JSX high-priced stocks, so those decrease the investors’ willingness to trade.
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