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REIT Stock Splits and Market Efficiency

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  • William Hardin

    ()

  • Kartono Liano

    ()

  • Gow-Cheng Huang

    ()

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    Abstract

    An analysis of real estate investment trust (REIT) stock splits is presented. Evaluation of the initial reaction to split REITs supports efficient market pricing where REITs generate statistically significant positive announcement date returns, no statistically significant record date returns, and muted ex-date returns. In the long-term, split REITs do not consistently out perform benchmark portfolios over one-year, two-year, and three-year periods. REITs split subsequent to a substantial run up in stock price and to improve the position of their post split stock price relative to the stock price of the typical REIT. Copyright Springer Science + Business Media, Inc. 2005

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    Bibliographic Info

    Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

    Volume (Year): 30 (2005)
    Issue (Month): 3 (April)
    Pages: 297-315

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    Handle: RePEc:kap:jrefec:v:30:y:2005:i:3:p:297-315

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    Web page: http://www.springerlink.com/link.asp?id=102945

    Related research

    Keywords: REITs; stock split; market efficiency; behavioral finance; long-term performance; short-term performance;

    References

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    1. Grinblatt, Mark S. & Masulis, Ronald W. & Titman, Sheridan, 1984. "The valuation effects of stock splits and stock dividends," Journal of Financial Economics, Elsevier, vol. 13(4), pages 461-490, December.
    2. Michael Bradley & Dennis R. Capozza & Paul J. Seguin, 1998. "Dividend Policy and Cash-Flow Uncertainty," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 555-580.
    3. Edward F. Nelling & James M. Mahoney & Terry L. Hildebrand & Michael A. Goldstein, 1995. "Real Estate Investment Trusts, Small Stocks and Bid-ask Spreads," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(1), pages 45-63.
    4. Mitchell, Mark L & Stafford, Erik, 2000. "Managerial Decisions and Long-Term Stock Price Performance," The Journal of Business, University of Chicago Press, vol. 73(3), pages 287-329, July.
    5. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March.
    6. Michael T. Maloney & J. Harold Mulherin, 1992. "The Effects of Splitting on the Ex: A Microstructure Reconciliation," Financial Management, Financial Management Association, vol. 21(4), Winter.
    7. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    8. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
    9. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    10. Desai, Hemang & Jain, Prem C, 1997. "Long-Run Common Stock Returns following Stock Splits and Reverse Splits," The Journal of Business, University of Chicago Press, vol. 70(3), pages 409-33, July.
    11. Lamoureux, Christopher G & Poon, Percy, 1987. " The Market Reaction to Stock Splits," Journal of Finance, American Finance Association, vol. 42(5), pages 1347-70, December.
    12. So, Raymond W & Tse, Yiuman, 2000. " Rationality of Stock Splits: The Target-Price Habit Hypothesis," Review of Quantitative Finance and Accounting, Springer, vol. 14(1), pages 67-84, January.
    13. Ko Wang & John Erickson & George W. Gau, 1993. "Dividend Policies and Dividend Announcement Effects for Real Estate Investment Trusts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(2), pages 185-201.
    14. Dennis R. Capozza & Paul J. Seguin, 2003. "Inside Ownership, Risk Sharing and Tobin's q-Ratios: Evidence from REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(3), pages 367-404, 09.
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    Cited by:
    1. Benjamin Blau & Matthew Hill & Hao Wang, 2011. "REIT Short Sales and Return Predictability," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 481-503, May.
    2. Zhilan Feng & Chinmoy Ghosh & C. Sirmans, 2007. "Director Compensation and CEO Bargaining Power in REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 225-251, October.
    3. James C. Brau & Andrew Holmes, 2006. "Why Do REITs Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements," Journal of Real Estate Research, American Real Estate Society, vol. 28(1), pages 1-24.
    4. Qiang Li & Hua Sun & Seow Ong, 2006. "REIT Splits and Dividend Changes: Tests of Signaling and Information Substitutability," The Journal of Real Estate Finance and Economics, Springer, vol. 33(2), pages 127-150, September.
    5. Crystal Lin & Hamid Rahman & Kenneth Yung, 2009. "Investor Sentiment and REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 39(4), pages 450-471, November.
    6. James Doran & David Peterson & S. Price, 2012. "Earnings Conference Call Content and Stock Price: The Case of REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 402-434, August.
    7. Gow-Cheng Huang & Kartono Liano & Ming-Shiun Pan, 2011. "REIT Stock Splits and Liquidity Changes," The Journal of Real Estate Finance and Economics, Springer, vol. 43(4), pages 527-547, November.

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