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The Market Reaction Around Ex-Dates of Stock Splits Before and After Decimalization

Listed author(s):
  • Robin K. Chou


    (Department of Finance, National Central University, Jhongli City, Taoyuan, Taiwan, R.O.C.)

  • Wan-Chen Lee


    (Department of Finance, Ching Yun University, Jhongli City, Taoyuan, Taiwan, R.O.C.)

  • Sheng-Syan Chen


    (Department of Finance, National Taiwan University, Taipei, Taiwan, R.O.C.)

Registered author(s):

    This paper examines the stock price behavior around the ex-split dates both before and after the decimalization on the New York Stock Exchange (NYSE). We find that the abnormal ex-split day returns decrease and the abnormal trading volume increases in the 1/16th and decimal pricing eras, relative to the 1/8th pricing era. These findings are consistent with the microstructure-based explanations for the ex-day price movements. Our study also supports the hypothesis that short-term traders perform arbitrage activities during the ex-split dates when transaction costs become lower after the tick size is reduced.

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    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 08 (2005)
    Issue (Month): 02 ()
    Pages: 201-216

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    Handle: RePEc:wsi:rpbfmp:v:08:y:2005:i:02:p:201-216
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