Abstract

the spread, the authorities reduced it for certain stocks by adopting a single level of 10 millimes whatever the
price level and trading frequency.
While referring to results of several researchers, we used to doubt that such a decision had ever been justified.
Consequently, we have studied the impact of the reduction in tick size on return characteristics, liquidity and
order revision strategy adopted by investors.
We found that the change of tick size has not affected the return characteristics of the stocks in the three months
following the date of the change and this result is due to a certain conservatism of the investors who carry on
submitting their orders mainly to the prices authorized before the change of the tick.
On the other hand, our results emphasize a deterioration of the liquidity for the stocks whose tick size was
reduced and have a change in order strategy (for the stocks listed on the continuous) adopted by the investors
who became more aggressive by revising frequently their orders.

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