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."

Citation

Ohlson, James, and Stephen Penman. "Volatility Increases Subsequent to Stock Splits: An Empirical Aberration." Journal of Financial Economics 14, no. 2 (June 1985): 251-267.

Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.