Empirical evidences of stock split market effects

Under normal financial market circumstances (i.e., not under the shadow of financial crisis) it iscommon to believe that buying shares from large institutions leads to high profit. This is becausethe shares are of high trading value due to the solid financial foundation and superiorperformances of large institutions or companies. In contrast to these traders' belief, largecompanies often exercise "stock split" to strengthen the confidence on the company and encourage more investments in the company. A "stock split" increases the number of shares outstanding without increasing the company's capital. A conjecture is that a "stock split" action will increase the market liquidity because of the price decrease of each share; consequently, market trading activities would be intensifying such that log-return will be higher and the volatility also higher accordingly. The financial market literature shows that the impacts of "stock split" were controversial. In other words, the influences on the market of "stock split" did not always behave as the management expected. In this thesis, we intend to use limited available stock split data from NASDAQ to explore some empirical evidences on the impacts of "stock split". We also propose a DEAR-based trend analysis in log-return and market volatility measured by daily trading range for technical analysis on "stock split" impacts.

Grantor dc:publisher.institution

Department of Mathematics and Applied Mathematics

Year dc:date.issued

2011

Author dc:creator

• Mhuru, Trust Taruona

Advisor dc:contributor.advisor

• Guo, Renkuan

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/6077

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/6077