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POSTS BY ROONGKIAT RATANABANCHUEN
  • A study of intraday trading behavior around tick size changes

    Roongkiat Ratanabanchuen    Kanis Saengchote
    04 Dec 2017
    973
    16

    In Thailand, tick sizes for stock trades are not decimalized but instead fixed over predefined intervals. While changes in tick sizes are exogenous, investors seem to behave differently around such thresholds. Using high-frequency trade and quote data from the Stock Exchange of Thailand between 2002 and 2008, we document that investors are more likely to sell their stocks (as “market” orders) at threshold prices. Despite the influence of price clusters (at round numbers, which are also threshold prices), we show that imbalances are more likely to exist at threshold prices. While investors of all types sell at the thresholds, retail investors tend to also set limit orders to buy at the thresholds as prices approach from below. There is also no evidence that investors can systematically profits from the imbalance, suggesting that the trading activities may increase trading costs without returns to compensate.