The Nominal Share Price Puzzle

William C. Weld, Roni Michaely, Richard Thaler and Shlomo Benartzi

Journal of Economic Perspectives, 2009, vol. 23, issue 2, 121-42

Abstract: The average nominal share prices of common stocks traded on the New York Stock Exchange have remained constant at approximately $35 per share since the Great Depression as a result of stock splits. It is surprising that U.S. firms actively maintained constant nominal prices for their shares while general prices in the economy went up more than tenfold. This is especially puzzling given that commissions paid by investors on trading ten $35 shares are about ten times those paid on a single $350 share. We review potential explanations including signaling and optimal trading ranges and find that none of the existing theories are able to explain the observed constant nominal prices. We suggest that the evidence is consistent with the idea that customs and norms can explain the nominal price puzzle.

JEL-codes: G14 N22 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/jep.23.2.121
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.2.121 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:23:y:2009:i:2:p:121-42

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().