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Trading Patterns Of Small And Large Traders Around Stock Split Ex‐Dates

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  • Lawrence Kryzanowski
  • Hao Zhang

Abstract

We investigate the trading patterns of small and large traders around stock split ex‐dates. Using the intraday transaction database for the Toronto Stock Exchange during 1983–89, we find that stock splits are associated with significant changes in trading patterns. Although stock splits appear to have little effect on the trading behavior of large traders (trade value of at least $100,000), they are associated with significant decreases in odd‐lot trading and increases in small board‐lot trading (trade value of less than $10,000). Although the liquidity premia decrease for all trade sizes, trade direction changes significantly from sell to buy after split ex‐dates for all but the large trades, where the change is in the opposite direction. The significant increase in variances after split ex‐dates is explained by various microstructure‐related variables, and small (large) trades appear to be (de)stabilizing.

Suggested Citation

  • Lawrence Kryzanowski & Hao Zhang, 1996. "Trading Patterns Of Small And Large Traders Around Stock Split Ex‐Dates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(1), pages 75-90, March.
    • Handle: RePEc:bla:jfnres:v:19:y:1996:i:1:p:75-90
    DOI: 10.1111/j.1475-6803.1996.tb00585.x
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    Cited by:

    1. Riccardo Ferretti & Francesco Pattarin, 2008. "Is public information really public? The role of newspapers," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0008, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    2. Riccardo Ferretti & Francesco Pattarin, 2008. "Is public information really public? The role of newspapers," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 08013, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    3. Bjursell, Johan & Frino, Alex & Tse, Yiuman & Wang, George H.K., 2010. "Volatility and trading activity following changes in the size of futures contracts," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 967-980, December.
    4. Frank, Murray & Jagannathan, Ravi, 1998. "Why do stock prices drop by less than the value of the dividend? Evidence from a country without taxes," Journal of Financial Economics, Elsevier, vol. 47(2), pages 161-188, February.
    5. 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.
    6. Nemiroff, Howard B. & Zhang, Zhaohui & Escobar, Victor A., 2008. "Inter-broker trades and return performance on the Toronto stock exchange," International Review of Economics & Finance, Elsevier, vol. 17(2), pages 258-268.
    7. Karamjeet Kaur & Balwinder Singh, 2009. "Stock Price Reaction to Bonus Share Announcements in India," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 34(2), pages 202-226, May.
    8. Bilal Ahmad Pandow & Khurshid Ahmad Butt, 2019. "Impact of Share Splits on Stock Returns: Evidences from India," Vision, , vol. 23(4), pages 432-441, December.
    9. 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.
    10. David Michayluk & Paul Kofman, 2001. "Market Structure and Stock Splits," Research Paper Series 62, Quantitative Finance Research Centre, University of Technology, Sydney.
    11. Guo, Fang & Zhou, Kaiguo & Cai, Jinghan, 2008. "Stock splits, liquidity, and information asymmetry--An empirical study on Tokyo Stock Exchange," Journal of the Japanese and International Economies, Elsevier, vol. 22(3), pages 417-438, September.
    12. Aktas, Osman Ulas & Kryzanowski, Lawrence, 2014. "Trade classification accuracy for the BIST," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 259-282.
    13. 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.
    14. Shing‐yang Hu & Yun‐Ian Tseng, 2006. "Who Wants to Trade Around Ex‐Dividend Days?," Financial Management, Financial Management Association International, vol. 35(4), pages 95-119, December.
    15. José Yagüe & J. Gómez-Sala, 2005. "Price and tick size preferences in trading activity changes around stock split executions," Spanish Economic Review, Springer;Spanish Economic Association, vol. 7(2), pages 111-138, June.
    16. Justin Cox & Bonnie Van Ness & Robert Van Ness, 2022. "Stock splits and retail trading," The Financial Review, Eastern Finance Association, vol. 57(4), pages 731-750, November.
    17. Richard Chung & Lawrence Kryzanowski, 1998. "Are the Market Effects Associated with Revisions to the TSE300 Index Robust?," Multinational Finance Journal, Multinational Finance Journal, vol. 2(1), pages 1-36, March.
    18. 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.
    19. Nickolaos Travlos & Lenos Trigeorgis & Nikos Vafeas, 2001. "Shareholder Wealth Effects of Dividend Policy Changes in an Emerging Stock Market: The Case of Cyprus," Multinational Finance Journal, Multinational Finance Journal, vol. 5(2), pages 87-112, June.

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