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The behaviour of share prices in the run-up to and aftermath of stock splits: evidence for ‘share subdivisions’ in Hong Kong 2003–2005

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  • Paul B. McGuinness
  • Thomas Birtch

Abstract

In this short note, analysis is made of the price effects in the immediate run-up to and aftermath of voluntary ‘share subdivisions’. Evidence for stock splits conducted in Hong Kong between January 2003 and December 2005 points to a general surge in prices prior to split announcements with a much weaker, but generally positive, return picture emerging thereafter. Regression analysis also points to support for a ‘trading range’ hypothesis and helps extend earlier findings for Hong Kong reported in Wu and Chan (1997) and elsewhere (see Lakonishok and Lev, 1987 for the USA for example). Finally, consistent with the surge in prices prior to split announcement, there is some evidence to indicate that return volatilities over the 30 day return period immediately preceding announcement exceed volatility levels for each of two successive 30 day return periods.

Suggested Citation

  • Paul B. McGuinness & Thomas Birtch, 2006. "The behaviour of share prices in the run-up to and aftermath of stock splits: evidence for ‘share subdivisions’ in Hong Kong 2003–2005," Applied Financial Economics Letters, Taylor & Francis Journals, vol. 2(5), pages 285-293.
    • Handle: RePEc:taf:raflxx:v:2:y:2006:i:5:p:285-293
    DOI: 10.1080/17446540600697347
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