Anshuman And Kalay-Can Splits Create Market Liquidity – Theory And Evidence



Book Description

We present a market microstructure model of stock splits in the presence of minimum  tick size rules.The key feature of the model is that  iscretionary trading is endogenously determined. There exists a tradeoff between adverse selection costs on the one hand and discreteness  elated costs and opportunity costs of monitoring the market on the other hand. Under certain parameter values, there exists an optimal price. We  ocument an inverse relation between the coefficient of variation of intraday trading volume and the stock price level. This empirical evidence and  ther existing evidence are consistent with the model. r 2002 Elsevier Science B.V. All rights reserved


File Size: 393KB
File Type: PDF
Pages: 43

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