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A Note on Affordability and the Optimal Share Price


  • William T. Chittenden
  • Janet D. Payne
  • J. Holland Toles


Despite the increase in institutional ownership, decreased trading costs, and increased real personal savings, we find that the average stock price is lower today than it was in the 1920s. In the aggregate, the propensity to split is a function of recent market performance, personal savings, and the desirability of appearing to be a small firm. Our results indicate that, after decades of inflation and the average stock price falling, splitting stocks to return to an "affordable" trading range must be rejected as an explanation. This suggests that other economic forces are behind splits, whether traditional or behavioral in nature. Copyright (c) 2010, The Eastern Finance Association.

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  • William T. Chittenden & Janet D. Payne & J. Holland Toles, 2010. "A Note on Affordability and the Optimal Share Price," The Financial Review, Eastern Finance Association, vol. 45(1), pages 205-216, February.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:1:p:205-216

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