Lower tick sizes and futures pricing efficiency: evidence from the emerging Malaysian market

Sunil S. Poshakwale, and Jude W. Taunson, and Anandadeep Mandal, and Michael Theobald, (2019) Lower tick sizes and futures pricing efficiency: evidence from the emerging Malaysian market. Review of Quantitative Finance and Accounting, 53. pp. 1135-1163.

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Abstract

We provide robust evidence of the impact on spot market liquidity and the pricing efciency of FBM-FKLI index futures following the introduction of lower tick sizes for the stocks listed in the Bursa Malaysia. Our fndings show a signifcant increase in unexpected trading volume and the speed of mean reversion of the futures mispricing. We fnd that the increase in the unexpected trading volume of the underlying stocks helps in reducing intermarket price discrepancies. The fndings ofer new evidence that lowering of tick sizes improves pricing efciency in the Malaysian futures market.

Item Type: Article
Uncontrolled Keywords: Index futures, Speed of adjustment, Mean reversion, Market microstructure Emerging markets
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: FACULTY > Labuan Faculty of International Finance
Depositing User: MDM SITI AZIZAH IDRIS
Date Deposited: 10 Mar 2020 02:14
Last Modified: 10 Mar 2020 02:14
URI: http://eprints.ums.edu.my/id/eprint/25163

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