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The Impact of Clientele Changes: Evidence from Stock Splits

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Author Info

  • Ravi Dhar
  • William Goetzmann
  • Ning Zhu
  • EFA Moscow

Abstract

We examine the trades of individual and professional investors around stock splits and find that splits bring about a significant shift in investor clientele. We find that a higher fraction of post-split trades are made by less sophisticated investors, as individual investors increase and professional investors reduce their aggregate buying activity following stock splits. This behavior supports the common practitioners' belief that stock splits help attract new investors and improve stock liquidity. The shift in clientele also influences return properties, price discovery, and asset prices: stocks exhibit stronger serial correlation after splits; stocks co-move more with the market index; and the introduction of new investors explains part of the positive post-split drift puzzle.

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File URL: http://icfpub.som.yale.edu/publications/2598
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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm369.

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Date of creation: 01 Dec 2004
Date of revision: 01 Sep 2009
Handle: RePEc:ysm:somwrk:ysm369

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Web page: http://icf.som.yale.edu/
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Related research

Keywords: Stock Splits; Clientele Change; Market Efficiency; Noise Trading; Investor Sophistication; Splits; Clientele Shift; Liquidity;

This paper has been announced in the following NEP Reports:

References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Apple Split
    by Jonas Feit in Conscience Warrior on 2014-04-24 16:00:00

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