The Impact of Tick Size Reduction on the Price Discovery of ADRs and the Underlying Stocks: Evidence from Taiwan Stock Exchange

• Main Authors: Jia-Wei Wu, 巫稼唯
• Other Authors: Yin-Feng Gau
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/83634106551906872054

碩士 === 國立暨南國際大學 === 國際企業學系 === 97 === The Taiwan Stock Exchange reduced the minimum price variation on March, 1 2005. This thesis uses a sample of ADRs and the underlying stocks in Taiwan to study the price discovery before and after the tick size reduction. The results show that the stock prices of the underlying stock in Taiwan Stock Exchange (TSE) dominate the price discovery and even have improved after the reduction of minimum tick size. We also examine the effects if tick-size reduction on volatility, bid-ask spread and the turnover and find a statistically significant decrease in the volatility, bid-ask spread and the turnover after the reduction on minimum price variation. Especially, the decrease in the bid-ask spread is greater than the level found in previous study, but the change in turnover turns out to be inconsistent with previous research.