The Effects of ETFSplits on Liquidity and Individual Investors

Managerial Finance, Vol. 35, No. 9, pp. 754-771, 2009

Posted: 16 Jan 2011

See all articles by Susana Yu

Susana Yu

Iona College

Gwendolyn P. Webb

City University of New York (CUNY) - Baruch College - Zicklin School of Business

Date Written: January 15, 2009

Abstract

We investigate the effects of stock splits on sample of ETF stocks that were split in the years 2000-2006, and compare them to a similar sample of non-splitting control ETFs. We examine stock excess returns, total capital, several measures of liquidity, and the premium or discount relative to net present value around the split. We also test for increases in smaller trades after the split. Our results support the hypothesis that two key management objectives of splitting an ETF stock are to increase demand from retail investors and to increase the total capital under management. We also find support for the existence of momentum in stock price indexes.

Keywords: stock splits, signaling, stock returns, liquidity, bid-ask spread, exchange-traded funds

JEL Classification: G15, G29

Suggested Citation

Yu, Susana and Webb, Gwendolyn P., The Effects of ETFSplits on Liquidity and Individual Investors (January 15, 2009). Managerial Finance, Vol. 35, No. 9, pp. 754-771, 2009. Available at SSRN: https://ssrn.com/abstract=1740945

Susana Yu (Contact Author)

Iona College ( email )

715 North Avenue
New Rochelle, NY 10801
United States

Gwendolyn P. Webb

City University of New York (CUNY) - Baruch College - Zicklin School of Business ( email )

Department of Economics & Finance
P.O. Box B13-289 1 Bernard Baruch Way
New York, NY 10010
United States
646-312-3485 (Phone)

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