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Beta Changes around Stock Splits Revisited

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  • Wiggins, James B.

Abstract

Recent papers by Lamoureux and Poon (1987) and Brennan and Copeland (1988) document a significant permanent increase in average beta subsequent to stock split ex-dates. This paper demonstrates that the shift in estimated beta following ex-dates decays as the measurement interval is lengthened. There is no statistically significant difference between pre- and post-split betas using the Scholes-Williams (1977) estimator and weekly return data, or using monthly returns. We conclude that Lamoureux and Poon's and Brennan and Copeland's results can be attributed to a bias created by using too short a return measurement interval to estimate beta.

Suggested Citation

  • Wiggins, James B., 1992. "Beta Changes around Stock Splits Revisited," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(4), pages 631-640, December.
    • Handle: RePEc:cup:jfinqa:v:27:y:1992:i:04:p:631-640_00
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    Cited by:

    1. Fredj Jawadi & Wael Louhichi & Abdoulkarim Idi Cheffou & Hachmi Ben Ameur, 2019. "Modeling time-varying beta in a sustainable stock market with a three-regime threshold GARCH model," Annals of Operations Research, Springer, vol. 281(1), pages 275-295, October.
    2. Tu, Anthony H. & Wang, Ming-Chun, 2007. "The innovations of e-mini contracts and futures price volatility components: The empirical investigation of S&P 500 stock index futures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(2), pages 198-211, April.
    3. Jorg Bley, 2002. "Stock splits and stock return behaviour: how Germany tries to improve the attractiveness of its stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 12(2), pages 85-93.
    4. Ila Alam & Robin Sickles, 1998. "The Relationship Between Stock Market Returns and Technical Efficiency Innovations: Evidence from the US Airline Industry," Journal of Productivity Analysis, Springer, vol. 9(1), pages 35-51, January.
    5. Ravi Dhar & William Goetzmann & Ning Zhu & EFA Moscow, 2004. "The Impact of Clientele Changes: Evidence from Stock Splits," Yale School of Management Working Papers ysm369, Yale School of Management, revised 01 Sep 2009.
    6. Ravi Dhar & William Goetzmann & Ning Zhu & EFA Moscow, 2004. "The Impact of Clientele Changes: Evidence from Stock Splits," Yale School of Management Working Papers ysm369, Yale School of Management, revised 01 Sep 2009.
    7. Chern, Keh-Yiing & Tandon, Kishore & Yu, Susana & Webb, Gwendolyn, 2008. "The information content of stock split announcements: Do options matter?," Journal of Banking & Finance, Elsevier, vol. 32(6), pages 930-946, June.
    8. Pedro Antonio Martín-Cervantes & María del Carmen Valls Martínez, 2023. "Unraveling the relationship between betas and ESG scores through the Random Forests methodology," Risk Management, Palgrave Macmillan, vol. 25(3), pages 1-29, September.

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