The Impact of Clientele Changes: Evidence from Stock Splits
Yale School of Management - International Center for Finance
William N. Goetzmann
Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)
China Academy of Financial Research (CAFR); Yale School of Management; University of California, Davis - Graduate School of Management
Yale ICF Working Paper No. 03-14
EFA 2005 Moscow Meetings Paper
AFA 2005 Philadelphia Meetings
We examine the trades of individual and professional investors around stock splits and find that splits bring about a significant shift in investor clientele. We find that a higher fraction of post-split trades are made by less sophisticated investors, as individual investors increase and professional investors reduce their aggregate buying activity following stock splits. This behavior supports the common practitioners' belief that stock splits help attract new investors and improve stock liquidity. The shift in clientele also influences return properties, price discovery, and asset prices: stocks exhibit stronger serial correlation after splits; stocks co-move more with the market index; and the introduction of new investors explains part of the positive post-split drift puzzle.
Number of Pages in PDF File: 60
Keywords: Stock Splits, Clientele Change, Market Efficiency, Noise Trading, Investor Sophistication, Splits, Clientele Shift, Liquidity
JEL Classification: G1, G3
Date posted: December 28, 2004
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