Hostname: page-component-586b7cd67f-dsjbd Total loading time: 0 Render date: 2024-11-26T12:55:12.943Z Has data issue: false hasContentIssue false
  • English
  • Français

Beta Changes around Stock Splits Revisited

Published online by Cambridge University Press:  06 April 2009

James B. Wiggins
Get access Rights & Permissions [Opens in a new window]

Abstract

Recent papers by Lamoureux and Poon (1987) and Brennan and Copeland (1988) document a significant permanent increase in average beta subsequent to stock split ex-dates. This paper demonstrates that the shift in estimated beta following ex-dates decays as the measurement interval is lengthened. There is no statistically significant difference between pre- and post-split betas using the Scholes-Williams (1977) estimator and weekly return data, or using monthly returns. We conclude that Lamoureux and Poon's and Brennan and Copeland's results can be attributed to a bias created by using too short a return measurement interval to estimate beta.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 27 , Issue 4 , December 1992 , pp. 631 - 640
Copyright
Copyright © School of Business Administration, University of Washington 1992

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Atchison, M.; Butler, K.; and Simonds, R.. “Nonsynchronous Security Trading and Market Index Autocorrelation.” Journal of Finance, 42 (03 1987), 111–118.CrossRefGoogle Scholar
Brennan, M., and Copeland, T.. “Beta Changes around Stock Splits: A Note.” Journal of Finance, 43 (09 1988), 1009–1013.CrossRefGoogle Scholar
Cohen, K.; Hawawini, G.; Maier, S.; Schwartz, R.; and Whitcomb, D.. “Friction in the Trading Process and the Estimation of Systematic Risk.” Journal of Financial Economics, 12 (08 1983), 263–278.CrossRefGoogle Scholar
Conroy, R.; Harris, R.; and Benet, B.. “The Effects of Stock Splits on Bid-Ask Spreads.” Journal of Finance, 45 (09 1990), 1285–1296.Google Scholar
Constantinides, G. “Optimal Stock Trading with Personal Taxes.” Journal of Financial Economics, 13 (03 1984), 65–89.CrossRefGoogle Scholar
Copeland, T. “Liquidity Changes Following Stock Splits.” Journal of Finance, 34 (03 1979), 115–141.CrossRefGoogle Scholar
Dravid, A. “A Note on the Behavior of Stock Returns around Ex-Dates of Stock Distributions.” Journal of Finance, 42 (03 1987), 163–168.Google Scholar
Fowler, D., and Rorke, C.. “Risk Measurement when Shares are Subject to Infrequent Trading: Comment.” Journal of Financial Economics, 12 (08 1983), 279–283.CrossRefGoogle Scholar
Grinblatt, M.; Masulis, R.; and Titman, S.. “The Valuation Effects of Stock Splits and Stock Dividends.” Journal of Financial Economics, 13 (12 1984), 461–490.CrossRefGoogle Scholar
Ibbotson, R. “Price Performance of Common Stock New Issues.” Journal of Financial Economics, 2 (09 1975), 235–272.CrossRefGoogle Scholar
Ibbotson, R. “SBBI Yearbook.” Charlottesville, VA: Financial Analysts Research Foundation (1990).Google Scholar
King, B. “Market and Industry Factors in Stock Price Behavior.” Journal of Business, 39 (01 1966), 139–190.CrossRefGoogle Scholar
Lakonishok, J., and Lev, B.. “Stock Splits and Stock Dividends: Why, Who and When.” Journal of Finance, 42 (09 1987), 913–932.CrossRefGoogle Scholar
Lamoureux, C., and Poon, P.. “The Market Reaction to Stock Splits.” Journal of Finance, 42 (12 1987), 1347–1370.CrossRefGoogle Scholar
Lo, A., and MacKinlay, A. C.. “When Are Contrarian Profits Due to Stock Market Overreaction?” Review of Financial Studies, 3 (No. 2, 1990), 175–206.CrossRefGoogle Scholar
Ohlson, J., and Penman, S.. “Volatility Increases Subsequent to Stock Splits: An Empirical Aberration.” Journal of Financial Economics, 14 (06 1985), 251–266.CrossRefGoogle Scholar
Scholes, M., and Williams, J.. “Estimating Betas from Nonsynchronous Data.” Journal of Financial Economics, 5 (12 1977), 309–327.CrossRefGoogle Scholar
Sheikh, A. “Stock Splits, Volatility Increases, and Implied Volatilities.” Journal of Finance, 44 (12 1989), 1361–1372.CrossRefGoogle Scholar