Price-Based Return Comovement
42 Pages Posted: 25 Mar 2008 Last revised: 27 Nov 2008
There are 2 versions of this paper
Price-Based Return Comovement
Date Written: September 1, 2008
Abstract
Similarly priced stocks move together. Stocks that undergo splits experience an increase in comovement with lower priced stocks and a decrease in their comovement with higher priced stocks. Price-based comovement is not explained by economic fundamentals, firm size, or changes in liquidity or information diffusion. The shift in comovement following splits is greater for large stocks, high priced stocks, and when investor sentiment is high. In the full cross-section, price-based portfolios explain variation in stock-level returns after controlling for movements in the market and industry portfolios as well as portfolios based on size, book-tomarket, transaction costs, and return momentum. The results suggest that investors categorize stocks based on price.
Keywords: G14
JEL Classification: Price, Return Comovement
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Catering Through Nominal Share Prices
By Malcolm P. Baker, Robin M. Greenwood, ...
-
Catering Through Nominal Share Prices
By Malcolm P. Baker, Robin M. Greenwood, ...
-
Catering Through Nominal Share Prices
By Malcolm P. Baker, Robin M. Greenwood, ...
-
By William Charles Weld, Shlomo Benartzi, ...
-
By William Charles Weld, Roni Michaely, ...
-
The Impact of Clientele Changes: Evidence from Stock Splits
By Ravi Dhar, William N. Goetzmann, ...
-
Is Share Price Related to Marketability? Evidence from Mutual Fund Share Splits