Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 575-589 |
| Number of pages | 15 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 38 |
| Issue number | 3 |
| DOIs | |
| State | Published - 1 Jan 2003 |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics