Is Share Price Related to Marketability? Evidence from Mutual Fund Share Splits
31 Pages Posted: 19 Oct 2003
Date Written: August 1999
We examine the "marketability hypothesis," which states that stock splits enhance the attractiveness of shares to investors by restoring prices to a preferred trading range. We examine splits of mutual fund shares because they provide a clean testing ground for the marketability hypothesis, since the conventional rationales for common stock splits do not apply. We find that splitting funds experience significant increases (relative to non-splitting matched funds) in net assets and shareholders. Stock splits do appear to enhance marketability.
JEL Classification: G14; G23; G30
Suggested Citation: Suggested Citation