Volatility increases subsequent to stock splits: An empirical aberration

James Arvid Ohlson, Stephen H. Penman

Research output: Journal article publicationJournal articleAcademic researchpeer-review

129 Citations (Scopus)

Abstract

This paper analyzes the empirical behavior of stock-return volatilities prior to and subsequent to the ex-dates of stock splits. The evidence demonstrates rather unambiguously that there is, on the average, an approximately 30% 'arbitrary' increase in the return standard deviations following the ex-date. The increase holds for both daily and weekly data, and it is not temporary. No explanatory confounding variables, such as institutional frictions affecting price observations, have been identified. We view the findings as being essentially inconsistent with the notion of 'rational pricing'.
Original languageEnglish
Pages (from-to)251-266
Number of pages16
JournalJournal of Financial Economics
Volume14
Issue number2
DOIs
Publication statusPublished - 1 Jan 1985
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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