Investigating the Effect of Stock Split on Short-term Stock Returns: The Case for Chinese Shanghai Stock Market
Date
2016
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Haverford College. Department of Economics
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Thesis
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Award
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eng
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Open Access
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Abstract
This paper investigates the effect of magnitude of split size on short-term post-split returns as well as the effect of split announcement on post-split returns, using stocks data from Shanghai Stock Exchange. The study uses OLS model to test for the relationship, controlling for stock characteristics and the market effect. The main regression models find positive significant effect of split size on post-split returns, but no significant effect of split announcement on post-split returns. The results from robustness checks reject the positive significance of split size on returns. One possible explanation for the significance in the main regression is that the outlier points created biases in OLS model. Overall, this study finds no significant effect of split size on short-term post-split returns nor that of split announcement on returns.