The Impact of Minimum Trading Units on Stock Value and Price Volatility

29 Pages Posted: 19 Jun 2002

See all articles by Shmuel Hauser

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management; Government of the State of Israel - Israel Securities Authority

Beni Lauterbach

Bar-Ilan University - Graduate School of Business Administration; European Corporate Governance Institute (ECGI)

Date Written: March 2002

Abstract

We study how minimum trading unit changes on the Tel-Aviv Stock Exchange impact stock trading activity, price volatility and value. The value effects are consistent with Merton (1987)'s model, that is 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 (1999)'s tests of Melson (1987) 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.

Suggested Citation

Hauser, Shmuel and Lauterbach, Beni, The Impact of Minimum Trading Units on Stock Value and Price Volatility (March 2002). EFMA 2002 London Meetings, Available at SSRN: https://ssrn.com/abstract=314389 or http://dx.doi.org/10.2139/ssrn.314389

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
+972 2 651 3939 (Phone)
+972 7 6472896 (Fax)

Government of the State of Israel - Israel Securities Authority

22 Kanfei Nesharim Street
Jerusalem 95464
Israel

Beni Lauterbach (Contact Author)

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
266
Abstract Views
2,968
rank
142,001
PlumX Metrics