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The Impact of the Tick Size Reduction on Liquidity: Empirical Evidence from the Jakarta Stock Exchange

Gadjah Mada International Journal of Business (GamaIJB) · Vol. 6 No. 2 (2004) · pp. 225–249

DOI
10.22146/gamaijb.5548
ISSN
2338-7238, 1411-1128
Published
2004-06-12
Publisher
Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada
Language
eng

Abstract

On July 3, 2000, the Jakarta Stock Exchange (JSX) reduced its tick size from Rp25.00 to Rp5.00. This study examines the impact of the tick size reduction on the JSX bid-ask spread, market depth, and trading activity. Using daily data, this study finds that the rupiah spread, percentage spread, and depth decreased significantly. All of these findings are not surprising since they are consistent with previous studies conducted in several different markets.In contrast to previous studies, this study finds that the key variable in determining the difference in performance of JSX stocks following the tick size reduction is the price of the stock. Specifically, all the trading activity measures e.g. in the number of trades, share volume, and rupiah volume, increased for low-priced stocks. Conversely, trading activity decreased for high-priced stocks. The possible explanation is that absolute tick size Rp5.00 is too small in economic terms for JSX high-priced stocks, so those decrease the investors’ willingness to trade.

Keywords

Collaboration network of the authors

7 authors · 9 co-authorship links · 1 across different organisations

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  • Universitas Gadjah Mada
  • Sanata Dharma University
  • Different organisations
  • Same organisation
  • Affiliation unknown
  • Thicker line = more joint articles · bigger circle = more articles
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Co-authorOrganisationJoint articles
Jogiyanto HartonoUniversitas Gadjah Mada1
Mamduh Mahmadah HanafiUniversitas Gadjah Mada1
Setiyono SetiyonoUniversitas Gadjah Mada1
Eddy JunarsinUniversitas Gadjah Mada1
Leo Indra WardhanaUniversitas Gadjah Mada1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.ugm.ac.id/gamaijb/oai, first harvested 28 Okt 2026, last seen 28 Okt 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en-US">The Impact of the Tick Size Reduction on Liquidity: Empirical Evidence from the Jakarta Stock Exchange</dc:title>
	<dc:creator>Purwoto, Lukas</dc:creator>
	<dc:creator>Tandelilin, Eduardus</dc:creator>
	<dc:subject xml:lang="en-US">Jakarta Stock Exchange; liquidity; tick size</dc:subject>
	<dc:description xml:lang="en-US">On July 3, 2000, the Jakarta Stock Exchange (JSX) reduced its tick size from Rp25.00 to Rp5.00. This study examines the impact of the tick size reduction on the JSX bid-ask spread, market depth, and trading activity. Using daily data, this study finds that the rupiah spread, percentage spread, and depth decreased significantly. All of these findings are not surprising since they are consistent with previous studies conducted in several different markets.In contrast to previous studies, this study finds that the key variable in determining the difference in performance of JSX stocks following the tick size reduction is the price of the stock. Specifically, all the trading activity measures e.g. in the number of trades, share volume, and rupiah volume, increased for low-priced stocks. Conversely, trading activity decreased for high-priced stocks. The possible explanation is that absolute tick size Rp5.00 is too small in economic terms for JSX high-priced stocks, so those decrease the investors’ willingness to trade.</dc:description>
	<dc:publisher xml:lang="en-US">Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada</dc:publisher>
	<dc:date>2004-06-12</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
	<dc:type>info:eu-repo/semantics/publishedVersion</dc:type>
	<dc:type xml:lang="en-US">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.ugm.ac.id/gamaijb/article/view/5548</dc:identifier>
	<dc:identifier>10.22146/gamaijb.5548</dc:identifier>
	<dc:source xml:lang="en-US">Gadjah Mada International Journal of Business; Vol 6, No 2 (2004): May-August; 225 - 249</dc:source>
	<dc:source>2338-7238</dc:source>
	<dc:source>1411-1128</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.ugm.ac.id/gamaijb/article/view/5548/4519</dc:relation>
</oai_dc:dc>