A Note on Affordability and the Optimal Share Price

12 Pages Posted: 18 Jan 2010

See all articles by William T. Chittenden

William T. Chittenden

Texas State University

Janet D. Payne

Texas State University, San Marcos - Department of Finance and Economics

J. Holland Toles

affiliation not provided to SSRN

Abstract

Despite the increase in institutional ownership, decreased trading costs, and increased real personal savings, we find that the average stock price is lower today than it was in the 1920s. In the aggregate, the propensity to split is a function of recent market performance, personal savings, and the desirability of appearing to be a small firm. Our results indicate that, after decades of inflation and the average stock price falling, splitting stocks to return to an “affordable” trading range must be rejected as an explanation. This suggests that other economic forces are behind splits, whether traditional or behavioral in nature.

Suggested Citation

Chittenden, William T. and Payne, Janet D. and Toles, J. Holland, A Note on Affordability and the Optimal Share Price. Financial Review, Vol. 45, Issue 1, pp. 205-216, February 2010, Available at SSRN: https://ssrn.com/abstract=1536845 or http://dx.doi.org/10.1111/j.1540-6288.2009.00243.x

William T. Chittenden (Contact Author)

Texas State University ( email )

601 University Drive
San Marcos, TX 78666-4616
United States
512-245-9655 (Phone)

HOME PAGE: http://www.business.txstate.edu/users/wc10/

Janet D. Payne

Texas State University, San Marcos - Department of Finance and Economics ( email )

San Marcos, TX 78666
United States

J. Holland Toles

affiliation not provided to SSRN

No Address Available

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