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Market Microstructure and the Ex-date Return

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  • Conrad, Jennifer S
  • Conroy, Robert

Abstract

This article examines the role of measurement biases, due to order flow effects, in abnormal split ex-day returns. The authors conjecture that postsplit orders consist of numerous small buyers and fewer larger sellers. This change in order flow causes closing prices to occur more frequently at the ask price, consistent with M. T. Maloney and J. H. Mulherin (1992) and M. Grinblatt and D. Keim (1991). In addition, this change causes specialists' spreads to increase, perhaps to offset larger average inventories. The authors examine both NYSE and NASDAQ samples and find that order flow biases can explain approximately 80 percent (48 percent) of the NYSE (NASDAQ) ex-day return. Copyright 1994 by American Finance Association.

Suggested Citation

  • Conrad, Jennifer S & Conroy, Robert, 1994. "Market Microstructure and the Ex-date Return," Journal of Finance, American Finance Association, vol. 49(4), pages 1507-1519, September.
    • Handle: RePEc:bla:jfinan:v:49:y:1994:i:4:p:1507-19
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    Citations

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    Cited by:

    1. Muscarella, Chris J. & Vetsuypens, Michael R., 1996. "Stock splits: Signaling or liquidity? The case of ADR 'solo-splits'," Journal of Financial Economics, Elsevier, vol. 42(1), pages 3-26, September.
    2. Ravi Dhar & William Goetzmann & Ning Zhu & EFA Moscow, 2004. "The Impact of Clientele Changes: Evidence from Stock Splits," Yale School of Management Working Papers ysm369, Yale School of Management, revised 01 Sep 2009.
    3. Koski, Jennifer Lynch, 1998. "Measurement Effects and the Variance of Returns after Stock Splits and Stock Dividends," The Review of Financial Studies, Society for Financial Studies, vol. 11(1), pages 143-162.
    4. Stehle, Richard & Seifert, Udo, 2003. "Stock Performance around Share Repurchase Announcements in Germany," SFB 373 Discussion Papers 2003,48, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    5. Kamara, Avraham & Koski, Jennifer Lynch, 2001. "Volatility, autocorrelations, and trading activity after stock splits," Journal of Financial Markets, Elsevier, vol. 4(2), pages 163-184, April.
    6. Efthymiou, Vassilis A. & Episcopos, Athanasios & Leledakis, George N. & Pyrgiotakis, Emmanouil G., 2021. "Intraday analysis of the limit order bias on the ex-dividend day of U.S. common stocks," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 405-421.
    7. Arie E. Gozluklu & Pietro Perotti & Barbara Rindi & Roberta Fredella, 2013. "Removing the Trade Size Constraint? Evidence from the Italian Market Design," Working Papers 493, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    8. Juan Carlos Gómez-Sala, 2001. "Rentabilidad y liquidez alrededor de la fecha de desdoblamiento de las acciones," Investigaciones Economicas, Fundación SEPI, vol. 25(1), pages 171-202, January.
    9. Susana Menéndez & Silvia Gómez-Ansón, 2003. "Stock splits: motivations and valuation effects in the Spanish market," Investigaciones Economicas, Fundación SEPI, vol. 27(3), pages 459-490, September.
    10. Porter, David C. & Thatcher, John G., 1998. "Fragmentation, competition, and limit orders: New evidence from interday spreads," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(1), pages 111-128.
    11. Wulff, Christian, 1999. "The market reaction to stock splits: Evidence from Germany," SFB 373 Discussion Papers 1999,42, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    12. Eric C. Chang & Tse-Chun Lin & Yan Luo & Jinjuan Ren, 2019. "Ex-Day Returns of Stock Distributions: An Anchoring Explanation," Management Science, INFORMS, vol. 65(3), pages 1076-1095, March.
    13. Dubofsky, David, 1997. "Limit orders and ex-dividend day return distributions," Journal of Empirical Finance, Elsevier, vol. 4(1), pages 47-65, January.

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