The Impact of Clientele Changes: Evidence from Stock Splits

60 Pages Posted: 28 Dec 2004  

Ravi Dhar

Yale School of Management - International Center for Finance

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Ning Zhu

China Academy of Financial Research (CAFR); Yale School of Management; University of California, Davis - Graduate School of Management

Abstract

We examine the trades of individual and professional investors around stock splits and find that splits bring about a significant shift in investor clientele. We find that a higher fraction of post-split trades are made by less sophisticated investors, as individual investors increase and professional investors reduce their aggregate buying activity following stock splits. This behavior supports the common practitioners' belief that stock splits help attract new investors and improve stock liquidity. The shift in clientele also influences return properties, price discovery, and asset prices: stocks exhibit stronger serial correlation after splits; stocks co-move more with the market index; and the introduction of new investors explains part of the positive post-split drift puzzle.

Keywords: Stock Splits, Clientele Change, Market Efficiency, Noise Trading, Investor Sophistication, Splits, Clientele Shift, Liquidity

JEL Classification: G1, G3

Suggested Citation

Dhar, Ravi and Goetzmann, William N. and Zhu, Ning, The Impact of Clientele Changes: Evidence from Stock Splits. Yale ICF Working Paper No. 03-14; EFA 2005 Moscow Meetings Paper; AFA 2005 Philadelphia Meetings. Available at SSRN: https://ssrn.com/abstract=410104

Ravi Dhar

Yale School of Management - International Center for Finance ( email )

Box 208200
New Haven, CT 06520-8200
United States

William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ning Zhu (Contact Author)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Yale School of Management ( email )

135 Prospect Street
Box 208200
New Haven, CT 06520-8200
United States

HOME PAGE: http://pantheon.yale.edu/~nz26/

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-3871 (Phone)
530-752-2924 (Fax)

HOME PAGE: http://www.gsm.ucdavis.edu/Faculty/Zhu/

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