Dynamics of Liquidity: An Analysis of Tick Size Reduction in Tokyo Stock Exchange

The Tokyo Stock Exchange has changed the tick size. This was done twice in 2014. The phase 1 (PI) was for the high price range, and the phase 2 (P2) was for the low price range only. We measured resiliency at the time of this tick reduction. There were differences in the duration of influence and influence depending on the time and variables. Especially after the tick size reduction, regarding the High Low Range, trading volume, and Amihud's illiquidity measure, PI is convex upward and the effect period is short, and P2 is convex downward, and the effect period is long. However, the impact period was long for stock prices, and the transition was similar. Also, a major contribution in this study was the measurement of the effect of tick size reduction on resiliency, which is one of the liquidity.