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The Information Content of Stock Split Announcements: Do Options Matter?Keh Yiing ChernWillow Bridge Asset Management Kishore TandonCUNY Baruch College - Zicklin School of Business Susana YuMontclair State University Gwendolyn P. WebbCity University of New York (CUNY) - Baruch College - Zicklin School of Business January 2006 Abstract: We provide a new test of the informational efficiency of trading in stock options in the context of stock split announcements. Stock split announcements are generally associated with positive abnormal returns. After controlling for market returns, market capitalization, book-to-market ratio, and trading volume, we find that the abnormal returns around stock split announcements are significantly lower for NYSE/Amex stocks that are optioned than for stocks that are not optioned. This is consistent with the hypothesis that the prices of optioned stocks embody more information, diminishing the impact of the stock split announcement. This provides new evidence of the beneficial effects of options on their underlying stocks.
Number of Pages in PDF File: 30 Keywords: stock split announcements, options JEL Classification: G14, G32 working papers seriesDate posted: May 3, 2006Suggested CitationContact Information
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