If you need an accessible version of this item please contact JSTOR User Support

What Do Stock Splits Really Signal?

David L. Ikenberry, Graeme Rankine and Earl K. Stice
The Journal of Financial and Quantitative Analysis
Vol. 31, No. 3 (Sep., 1996), pp. 357-375
DOI: 10.2307/2331396
Stable URL: http://www.jstor.org/stable/2331396
Page Count: 19
  • Download PDF
  • Cite this Item

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support
What Do Stock Splits Really Signal?
Preview not available

Abstract

We observe significant post-split excess returns of 7.93 percent in the first year and 12.15 percent in the first three years for a sample of 1,275 two-for-one stock splits. These excess returns follow an announcement return of 3.38 percent, indicating that the market under-reacts to split announcements. The evidence suggests that splits realign prices to a lower trading range, but managers self-select by conditioning the decision to split on expected future performance. Presplit runup and post-split excess returns are inversely related, indicating that our results are not caused by momentum.

Page Thumbnails

  • Thumbnail: Page 
357
    357
  • Thumbnail: Page 
358
    358
  • Thumbnail: Page 
359
    359
  • Thumbnail: Page 
360
    360
  • Thumbnail: Page 
361
    361
  • Thumbnail: Page 
362
    362
  • Thumbnail: Page 
363
    363
  • Thumbnail: Page 
364
    364
  • Thumbnail: Page 
365
    365
  • Thumbnail: Page 
366
    366
  • Thumbnail: Page 
367
    367
  • Thumbnail: Page 
368
    368
  • Thumbnail: Page 
369
    369
  • Thumbnail: Page 
370
    370
  • Thumbnail: Page 
371
    371
  • Thumbnail: Page 
372
    372
  • Thumbnail: Page 
373
    373
  • Thumbnail: Page 
374
    374
  • Thumbnail: Page 
375
    375