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Author Easley, David ♦ Saar, Gideon ♦ Angel, James ♦ Goldstein, Michael ♦ Heidle, Hans ♦ Kendrick, Joe
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Abstract A Microstructure Approach Extending an empirical technique developed in Easley, Kiefer, and O’Hara (1996, 1997a), we examine different hypotheses about stock splits. In line with the trading range hypothesis, we find that stock splits attract uninformed traders. However, we also find that informed trading increases, resulting in no appreciable change in the information content of trades. Therefore, we do not find evidence consistent with the hypothesis that stock splits reduce information asymmetries. The optimal tick size hypothesis predicts that stock splits attract limit order trading and this enhances the execution quality of trades. While we find an increase in the number of executed limit orders, their effect is overshadowed by the increase in the costs of executing market orders due to the larger percentage spreads. On balance, the uninformed investors' overall trading costs rise after stock splits. How Stock Splits Affect Trading: A Microstructure Approach I.
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Publisher Date 1998-01-01