The Market Reaction Around Ex-Dates of Stock Splits Before and After Decimalization

Robin K. Chou (), Wan-Chen Lee () and Sheng-Syan Chen ()
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Robin K. Chou: Department of Finance, National Central University, Jhongli City, Taoyuan, Taiwan, R.O.C.
Wan-Chen Lee: Department of Finance, Ching Yun University, Jhongli City, Taoyuan, Taiwan, R.O.C.
Sheng-Syan Chen: Department of Finance, National Taiwan University, Taipei, Taiwan, R.O.C.

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2005, vol. 08, issue 02, 201-216

Abstract: This paper examines the stock price behavior around the ex-split dates both before and after the decimalization on the New York Stock Exchange (NYSE). We find that the abnormal ex-split day returns decrease and the abnormal trading volume increases in the 1/16th and decimal pricing eras, relative to the 1/8th pricing era. These findings are consistent with the microstructure-based explanations for the ex-day price movements. Our study also supports the hypothesis that short-term traders perform arbitrage activities during the ex-split dates when transaction costs become lower after the tick size is reduced.

Keywords: Stock splits; decimalization; ex-dates (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (6)

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DOI: 10.1142/S0219091505000415

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