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Does tick size influence price discovery? Evidence from the Toronto Stock Exchange

✍ Scribed by Marie-Claude Beaulieu; Shafiq K. Ebrahim; Ieuan G. Morgan

Publisher: John Wiley and Sons
Year: 2002
Tongue: English
Weight: 225 KB
Volume: 23
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.10053

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

We investigate the price discovery role of an exchange‐traded fund and the futures contract for the
same market index. We find that the fund predicts the index in the subperiod after but not in the subperiod
before a substantial decrease in the minimum tick size. The futures predict the index in both subperiods. The
results are consistent with the view that the factors leading to successful price discovery do not depend on
zero investment, as in futures markets, but do depend on a small tick size. © 2003 Wiley Periodicals, Inc.
Jrl Fut Mark 23:49–66, 2003

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