Reexamining the Long-Run Stock Split Anomaly Puzzle
45 Pages Posted: 16 Oct 2001
Date Written: November 2001
Long-run performance is reexamined following stock splits during 1950 to 2000. Significantly positive and robust equally weighted abnormal returns are documented during the first year following the announcement month; however, significant value weighted long-run abnormal returns are largely confined to the period from 1975 to 1987. When long-run performance is examined following the ex or effective date of stock splits, abnormal returns are insignificant, except for equally weighted portfolios during 1975 to 1987. Further analysis documents that the equally weighted long-run abnormal performance during 1975 to 1987 is strongly correlated with unexpected decreases in post-split systematic risk.
Keywords: anomalies, long-run performance, market efficiency, stock splits
JEL Classification: G12, G14
Suggested Citation: Suggested Citation