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Q: Stock Splits ( No Answer,   5 Comments )
Question  
Subject: Stock Splits
Category: Business and Money > Finance
Asked by: salevene-ga
List Price: $5.00
Posted: 12 Feb 2005 16:23 PST
Expires: 14 Mar 2005 16:23 PST
Question ID: 473529
I'm interested in purchasing a stock that is going to split within the
next month (2 for 1 shares).  I was wondering if there was any
research out there on the effect of a split before it happens (and
after).  I was looking for some reasearch, if any, on what happens to
the price of the stock.

Thanks,
Answer  
There is no answer at this time.

Comments  
Subject: Re: Stock Splits
From: siliconsamurai-ga on 13 Feb 2005 05:31 PST
 
The stock usually goes up after the split takes place but I don't have
any reference to offer. It's just one of those percentage plays stock
market insiders usually try to take advantage of, like the fact that
most stock market profits take place in just one half of the year.

These things are statistically verified but they don't always work.
Subject: Re: Stock Splits
From: sqylogin-ga on 13 Feb 2005 05:38 PST
 
In actual theory, stock splits should have zero effect.
http://www.sec.gov/answers/stocksplit.htm

But in the real world, prices usually go up.  Stock splits increase
the number of shares outstanding, and decrease the cost by a
proportional amount.  This makes the stock more affordable, and may
possibly increase demand.
http://www.rightline.net/home/tradingsplits.html

Good luck.
Subject: Re: Stock Splits
From: siliconsamurai-ga on 13 Feb 2005 08:40 PST
 
Another reason they tend to go up is because more people are willing
to buy cheaper stocks - it's merely a psychological thing as alluded
to by squlogin

MOre importantly, companies which split are not only usually rising
and have been doing so for a while, the board of directors obviously
believes the value will continue to rise.
Subject: Re: Stock Splits
From: salevene-ga on 14 Feb 2005 08:03 PST
 
Thans for the insight everyone, it is much appreciated.
Subject: Re: Stock Splits
From: olin_guru-ga on 16 Feb 2005 20:57 PST
 
There is a paper by Ravi Dhar of Yale that talks about the effects of
clientele changes before and after stock splits. This seems like
relevant reference to use.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=410104

Hope this is useful. Good Luck.

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