Tick Size Tolls: Can a Trading Slowdown Improve Earnings News Discovery?

被引:23
作者
Lee, Charles M. C. [1 ]
Watts, Edward M. [1 ]
机构
[1] Stanford Univ, Grad Sch Business, Stanford, CA 94305 USA
关键词
earnings announcements; price informativeness; information acquisition; price discovery; market efficiency; Tick Size Pilot; algorithmic trading; PRICE DISCOVERY; INFORMATION-CONTENT; LIQUIDITY PROVISION; MARKET; ANNOUNCEMENTS; SIXTEENTHS; EFFICIENCY;
D O I
10.2308/TAR-2018-0689
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
This study examines how an increase in tick size affects algorithmic trading (AT), fundamental information acquisition (FIA), and the price discovery process around earnings announcements (EAs). Leveraging the SEC's randomized Tick Size Pilot experiment, we show that a tick size increase results in a decline in AT and a sharp drop in absolute cumulative abnormal returns and volume around EAs. More importantly, we find increased FIA in the preannouncement period. Specifically, we show: (1) treatment firms' pre-announcement returns better anticipate next quarters standardized unexpected earnings; (2) these firms experience an increase in EDGAR web traffic prior to EAs; and (3) they exhibit a drop in price synchronicity with index returns. Taken together, our evidence suggests that while an increase in tick size reduces AT and abnormal market reaction after EAs, it also increases FIA activities prior to EAs.
引用
收藏
页码:373 / 401
页数:29
相关论文
共 86 条
  • [41] Measuring Investors' Opinion Divergence
    Garfinkel, Jon A.
    [J]. JOURNAL OF ACCOUNTING RESEARCH, 2009, 47 (05) : 1317 - 1348
  • [42] Eighths, sixteenths, and market depth: changes in tick size and liquidity provision on the NYSE
    Goldstein, MA
    Kavajecz, KA
    [J]. JOURNAL OF FINANCIAL ECONOMICS, 2000, 56 (01) : 125 - 149
  • [43] Do Market Efficiency Measures Yield Correct Inferences? A Comparison of Developed and Emerging Markets
    Griffin, John M.
    Kelly, Patrick J.
    Nardari, Federico
    [J]. REVIEW OF FINANCIAL STUDIES, 2010, 23 (08) : 3225 - 3277
  • [44] Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: Evidence from China
    Gul, Ferdinand A.
    Kim, Jeong-Bon
    Qiu, Annie A.
    [J]. JOURNAL OF FINANCIAL ECONOMICS, 2010, 95 (03) : 425 - 442
  • [45] The diversity of high-frequency traders
    Hagstromer, Bjorn
    Norden, Lars
    [J]. JOURNAL OF FINANCIAL MARKETS, 2013, 16 (04) : 741 - 770
  • [46] Han J., 2014, LIQUIDITY HIGH FREQU
  • [47] MINIMUM PRICE VARIATIONS, DISCRETE BID-ASK SPREADS, AND QUOTATION SIZES
    HARRIS, LE
    [J]. REVIEW OF FINANCIAL STUDIES, 1994, 7 (01) : 149 - 178
  • [48] Low-latency trading
    Hasbrouck, Joel
    Saar, Gideon
    [J]. JOURNAL OF FINANCIAL MARKETS, 2013, 16 (04) : 646 - 679
  • [49] Does Algorithmic Trading Improve Liquidity?
    Hendershott, Terrence
    Jones, Charles M.
    Menkveld, Albert J.
    [J]. JOURNAL OF FINANCE, 2011, 66 (01) : 1 - 33
  • [50] Driven to Distraction: Extraneous Events and Underreaction to Earnings News
    Hirshleifer, David
    Lim, Sonya Seongyeon
    Teoh, Siew Hong
    [J]. JOURNAL OF FINANCE, 2009, 64 (05) : 2289 - 2325