Predicting Stock Splits with the Help of Prior Firm-Specific Experiences

29 Pages Posted: 25 Oct 2007

See all articles by Kevin Krieger

Kevin Krieger

University of West Florida

David R. Peterson

Florida State University - Department of Finance

Date Written: October 22, 2007

Abstract

There is evidence of abnormal stock returns at and following stock split announcements. The successful prediction of splits could enhance investor returns, but few studies try to do so. We hypothesize that a neglected aspect of prior prediction studies is companies that previously split with favorable stock market responses are more likely to split again. Firms in industries with a record of favorable post-split performance may also be more likely to split. We find that inclusion of these factors enhances split prediction accuracy. We find that when this factor is included our split prediction model leads to significant abnormal returns.

Keywords: Stock splits, prediction model, market efficiency

JEL Classification: G14, G11

Suggested Citation

Krieger, Kevin and Peterson, David R., Predicting Stock Splits with the Help of Prior Firm-Specific Experiences (October 22, 2007). Available at SSRN: https://ssrn.com/abstract=1024367 or http://dx.doi.org/10.2139/ssrn.1024367

Kevin Krieger (Contact Author)

University of West Florida ( email )

11000 University Parkway
Pensacola, FL 32514-5750
United States

David R. Peterson

Florida State University - Department of Finance ( email )

Tallahassee, FL 32306-1042
United States
850-644-8200 (Phone)
850-644-4225 (Fax)

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