The Effects of ETFSplits on Liquidity and Individual Investors
Managerial Finance, Vol. 35, No. 9, pp. 754-771, 2009
Posted: 16 Jan 2011
Date Written: January 15, 2009
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: Suggested Citation