Nominal Stock Price Anchors: A Global Phenomenon?

Abstract

Weld, Michaely, Thaler, and Benartzi (2009) find that the average nominal U.S. stock price has been approximately $25 since the Great Depression. They report that this “nominal price fixation is primarily a U.S. or North American phenomenon.” Using a larger data set from 38 countries, we show that this nominal price fixation is a global phenomenon. We exploit the introduction of the Euro in 1999 to show that stock splits maintain these nominal stock price anchors. Generally, firms in countries with larger drops in nominal prices had fewer stock splits after stock prices are displayed in Euros.

Keywords: anchoring, norms, nominal share price, stock splits, reverse stock splits

JEL Classification: G02, G14, G15