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Price-based return comovement

  • Green, T. Clifton
  • Hwang, Byoung-Hyoun
Registered author(s):

    Similarly priced stocks move together. Stocks that undergo splits experience an increase in comovement with low-priced stocks and a decrease in their comovement with high-priced stocks. Price-based comovement is not explained by economic fundamentals, firm size, or changes in liquidity or information diffusion. The shift in comovement following splits is greater for large stocks, high-priced stocks, and when investor sentiment is high. In the full cross-section, price-based portfolios explain variation in stock-level returns after controlling for movements in the market and industry portfolios as well as portfolios based on size, book-to-market, transaction costs, and return momentum. The results suggest that investors categorize stocks based on price.

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    File URL: http://www.sciencedirect.com/science/article/B6VBX-4W38RMY-3/2/e8bd3fc74c6022ceba64597007c03f62
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    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 93 (2009)
    Issue (Month): 1 (July)
    Pages: 37-50

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    Handle: RePEc:eee:jfinec:v:93:y:2009:i:1:p:37-50
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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