Download or read book Testing Market Reaction to Stock Splits written by David J. Seviour and published by . This book was released on 1993 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Market Reaction to Stock Splits and the Ability to Earn Abnormal Returns written by Phương Anh Nguyễn and published by . This book was released on 2010 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: A stock split is often regarded as a pure cosmetic accounting treatment and yet prior research shows that the market reacts positively upon the arrival of the split announcement. However, up to now, there has not been any convincing explanation for this favourable response while there is intense debate amongst researchers about whether these positive abnormal returns persist in the future. We revisit the issues related to the performance of splitting companies both around and following the announcement date. This allows us to study the information content of the event and assess whether the market has incorporated the implication of such information in a timely manner. In addition, we hope to draw meaningful inference about the profitability of trading following the announcement date. Our findings suggest that there is information in the split announcements, which is positively valued by the market. However, abnormal returns cannot be earned with certainty following the event. This is evident in both the option market and the stock market. Specifically, if informed investors use the option market to trade on their information, then our results indicate that informed investors do not believe in the success of a strategy that buys splitting companies subsequent to the announcement date. This is because the post-split announcement drift does not exist following every split; it is conditioned on whether the firms will split again in the future. While prior studies argue that the long-run abnormal returns are sensitive to the time period, we find that the aggregate long-run abnormal returns are higher in a time period where there is a large proportion of companies that split multiple times. Nevertheless, knowing whether the companies have split multiple times in the past will not lead to positive abnormal returns ex-ante; these returns can only be guaranteed if investors are able to forecast accurately which sample firms will implement another split in the future. Once the split again condition is controlled for, there is no role for the time period to influence the magnitude and significance of the abnormal returns. We also discover that firms that have not split before consistently outperform firms that have. This implies that instead of buying every company that splits, investors can achieve higher returns by focusing on those that have not split in the recent past. However, the profitability of this strategy depends on the state of the market (bull versus bear market). In summary, the thesis shows that while stock splits are perceived as good news by investors, abnormal returns cannot be guaranteed following the announcement date. The information contained in a stock split is incorporated into stock prices in a timely manner, however, what type of information this event is capturing remains an open question.

Download or read book The Market Reaction to Stock Splits Evidence from India written by Asim Mishra and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock splits are a relatively new phenomenon in the Indian context. This paper examines the market effect of stock splits on stock price, return, volatility, and trading volume around the split ex-dates for a sample of stock splits undertaken in the Indian stock market over the period 1999-2005. The traditional view of stock splits as cosmetic transactions that simply divide the same pie into more slices is inconsistent with the significant wealth effect associated with the announcement of a stock split. However, the empirical evidence confirms a negative effect on price and return of stock splits. The overall cumulative abnormal returns after the split are negative. These results suggest that stock splits have induced the market to revise its optimistic valuation about future firm performance, rejecting signaling hypothesis to which splits convey positive information to markets. Hence, stock splits have reduced the wealth of the shareholders. The results also show that presence of a positive effect on volatility and trading volume following the split events, thus suggesting that split events enhance liquidity.

Download or read book The Market Reaction to Stock Splits Evidence from Germany written by Christian Wulff and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the market reaction to stock splits, using a set of German firms. Similar to the findings in the U.S., I find significant positive abnormal returns around boththe announcement and the execution day of German stock splits. I also observe an increase in return variance and in liquidity after the ex-day. Apparently, legal restrictions strongly limit the ability of German companies to use a stock split for signaling. I find that abnormal returns around the announcement day are consistently much lower in Germany than in the U.S. Further, I find that abnormal returns around the announcement day are not related to changes in liquidity, but (negatively) to firm size, thus lending support to the neglected firm hypothesis. On the methodological side the effect of thin trading on event study results is examined. Using trade-to-trade returns increases the significance of abnormal returns, but the difference between alternative return measurement methods is relatively small in short event periods. Thus, the observed market reaction cannot be attributed to measurement problemscaused by thin trading.

Download or read book A stock split event study using sector indices vs CDAX and some extensions of the standard market model written by David Bosch and published by GRIN Verlag. This book was released on 2011-08-03 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2009 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, Humboldt-University of Berlin (Institut für Bank und Börsenwesen), course: Seminar of Banking and Financial Markets, language: English, abstract: There are many theories in literature which try to examine possible reasons for a stock split. While a stock split seems to be just a cosmetic corporate event, it is often claimed that the motivation to carry out a stock split is to signal future profitability or to bring the share price to a preferred trading-range. Additionally there are many papers published, where the impact of a stock split on liquidity and institutional ownership is examined. Some results of these studies are briefly discussed in the Literature Review. Most researchers calculate their abnormal returns with the market model by using the most common index in their economy. In this paper, I check whether sector-indices fit the data better than the CDAX does. In some cases, the sector-indices describe the stock returns better. Another topic of event studies that researchers of the finance area often deal with is whether the assumptions of the market model established by Fama, Fisher, Jensen and Roll (1969) do hold for daily stock returns. I will discuss some of the weaknesses when applied to financial time series and I present two models which can improve the efficiency of the model.

Download or read book Market Reaction to Stock Splits from 2007 to 2010 written by Lucie Sislian and published by LAP Lambert Academic Publishing. This book was released on 2011-12 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: The stock split is a popular practice in many markets despite the fact that it does not fundamentally change the value of the firm. Many past evidences supported the liquidity hypothesis and found positive abnormal return around stock split date. However, all studies employed traditional event study methodology and defined the event date as either the announcement date or effective date. This thesis investigates the impact of stock splits on the firm's share prices on the Egyptian Exchange in the period 2007 to 2010. The purpose of this study is to test whether the investor can make an above normal return by relying on public information impounded in a stock split announcement. Stock split samples include a total of 906 daily observations and the corresponding EGX 30 was analyzed using standard risk adjusted event study methodology. An event study is conducted in order to identify abnormal returns both around the announcement day and the stock split date. Negative abnormal returns are found at the announcement date, while positive abnormal returns are found at the split date.

Download or read book The Market Reaction to Stock Splits written by Nahum Biger and published by . This book was released on 1993 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Market Reaction to Stock Split Announcements written by Alon Kalay and published by . This book was released on 2014 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We re-examine whether the abnormal returns around stock split announcements can be explained by an information hypothesis. Our evidence establishes a link between the abnormal returns and future earnings growth. Analysts revise earnings forecasts by 2.2-2.5% around split announcements, and this revision is significantly larger than that for matched firms. We further show that the earnings information in a split likely arises from the fact that splitting firms experience less mean reversion in their earnings growth relative to matched firms. Consistent with an earnings information hypothesis, the analyst revision and the abnormal returns are stronger for firms with more opaque information environments, and the cross-sectional variation in analyst revisions is related to the variation in abnormal returns.

Download or read book Market Reaction Around the Stock Splits and Bonus Issues written by Satyajit Dhar and published by . This book was released on 2008 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is often argued that stock splits and bonus issues are purely cosmetic events. However, many studies have found numerous stock market effects associated with bonus issues and stock splits. This paper examines the effects of these two types of events for the Indian stock market. We use the event study methodologies. The abnormal returns are calculated using the Capital Asset Pricing Model and then t-tests are conducted to test the significance. Consistent with the existence literatures, the two events are associated with significantly positive announcement effect. For bonus issues, the abnormal returns were about 1.8% and for stock splits, it was about 0.8%. On a whole, the paper finds evidence of semi-strong form efficiency in the Indian stock market.

Download or read book On Existence of an optimal Stock Price written by Lifan Wu and published by . This book was released on 1996 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Market Reaction to Bonus Issues and Stock Splits in India written by Koustubh Kanti Ray and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate events have numerous effects on the stock market, as found by several research studies in the world. In this regard, the aim of this paper is to test the semi-strong form of efficiency in the Indian equity market, following an event study approach. The events considered in this paper are bonus issues and stock splits that took place in the market from 1996 to 2008. These events are tested for abnormal returns and liquidity. The data selected is free from the impact of confounding events. -30 to 30 days investigation window is taken for all the events to test the abnormal returns and the change in liquidity. The results suggest that the Indian market reacts to the stock split announcements but not to bonus issues, and the change in liquidity is significant for stock splits at 1% significance level, whereas with 5% level of significance both bonus issues and stock splits show significant change in liquidity from pre- to post-event period.

Download or read book Tick Size and Limit Order Execution written by Tom M. Arnold and published by . This book was released on 1997 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Event Study of Reverse Stock Splits in Hong Kong Market written by Lihua Jing and published by . This book was released on 2014 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: I use event date methodology to examine the market reaction to reverse stock splits in Hong Kong market from 1991 to 2001. I first investigate the prospectuses distributed by reverse-splitting firms. Four major reasons are provided in firms' prospectuses: 1. Reverse splits will reduce transaction costs for dealings in the consolidated shares; 2. Reverse splits will improve the flexibility in pricing new issue when needed; 3. Share consolidation should raise the profile of the company among institutional and international investors; 4. Directors believe there exists a favorable stock price range, and reverse splits are therefore be used to bring the market value of the shares into a range that the firms consider more appropriate. I find that the abnormal returns around the announcement date are negative and small firms have stronger negative reaction. This result is consistent with the event studies in the U.S. market [Lamoureux and Poon (1987), Peterson and Peterson (1992)]. However, this negative response is contrary to the results in Canada where market reacts positively with a cumulative abnormal return of 9.3 percent on the announcement date that is thereafter maintained [Masse et al. (1997)]. No significant market response to the ex-date is observed. The adjusted trading volume increases considerably after reverse splits. This result partially suggests that the reverse stock improve the liquidity of the stock. The majority of the reverse-splitting firms do not change their board lot size after splits, they therefore reduce transacting costs. The relative tick sizes, which also affect the transaction cost, decrease significantly after splitting. My analysis of the cross-sectional distribution of the split factor provides no support for the quot;optimal stock price rangequot; hypothesis. Hence, the reverse stock splits can be viewed as a passive reaction to a decayed firm performance rather than an active means to achieve a specific objective.

Download or read book The Effects of Stock Split Credibility on The Market Reaction to Seasoned Equity Offerings written by 蘇筱琬 and published by . This book was released on 2011 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Analysis of the Effect of Stock Splits on Market Price written by Arthur H. Schultz and published by . This book was released on 1957 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Information Content of Stock Splits in the Presence of Contemporaneous Dividend Announcements written by Anand S. Desai and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we analyze the information content of stock splits by examining the market's reaction to the joint announcement of both stock splits and cash dividends. Several authors have suggested that splits are merely vehicles to convey information about either dividends or future earnings. If this were the case, one might expect the simultaneous announcement of the dividend to eliminate the marginal informativeness of the split. To the contrary, we find that even after controlling for the information contained in the dividend announcement, splits convey significant information to the market. We also examine whether both dividends and splits are conveying information about the same underlying attribute of firm value, or whether they are jointly providing information about more than one attribute. To study this issue, we employ latent variable/structural equation models. The analysis suggests that there are, in fact, at least two latent variable that are being signalled by the firm. While the information in dividend announcements leads to a statistically significant market revaluation, there is independent information contained in the split signal, and this information is significant in explaining the market's revaluation as well.

Download or read book Stock Splits and Attracting Attention written by Nino Papiashvili and published by . This book was released on 2019 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this research I study whether stock splits attract market's attention by exploring how investors are trading around event announcement dates. By employing high frequency intraday trading data from NYSE Trades and Quotes (TAQ) database I compute net abnormal buying around split announcements. The empirical tests on a matched pair sample of splitting and matching firms show that stock splits serve as attention attracting tool and investors are buying abnormally more around the announcements. Additional analysis confirms this finding - abnormal buying is significantly higher for larger splits. Furthermore, investors are more attracted to the splits that deliver higher subsequent long run stock performance.