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SVTPerformance's Chain of Restaurants
Road Side Pub
Google Stock Split
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<blockquote data-quote="Klaus" data-source="post: 16808804" data-attributes="member: 190070"><p>Here is what you can do to determine the signal provided by a stock split.</p><p></p><p>1. Download tick by tick data for every stock that has split for time period pre and post announcement and pre and post ex date. 5 days before and after is a relevant time period.</p><p>2. Compare this to performance for the relevant sector for each individual company.</p><p>3. Run statistical analysis to determine statistical significance of the signal.</p><p></p><p>Once upon a time I was active in academic finance and received a grant to study and publish work on exactly this subject. What you will find is that there is an initial pop on the announcement that decays to 0 by the ex date. This pop is most pronounced for companies that announce their very first split (like GOOGL). This still decays to zero by the ex date (as it did with GOOGL). For each successive split the pop on announcement is less and less and eventually falls to zero.</p><p></p><p>This same phenomena is observed with dividend announcements and reverse splits. The countercase is Berkshire Hathaway, which has never split and has significantly outperformed the market. The punchline is that a pizza that is comprised of 8 slices is the same amount of pizza as the same pizza that is comprised of 4 slices.</p></blockquote><p></p>
[QUOTE="Klaus, post: 16808804, member: 190070"] Here is what you can do to determine the signal provided by a stock split. 1. Download tick by tick data for every stock that has split for time period pre and post announcement and pre and post ex date. 5 days before and after is a relevant time period. 2. Compare this to performance for the relevant sector for each individual company. 3. Run statistical analysis to determine statistical significance of the signal. Once upon a time I was active in academic finance and received a grant to study and publish work on exactly this subject. What you will find is that there is an initial pop on the announcement that decays to 0 by the ex date. This pop is most pronounced for companies that announce their very first split (like GOOGL). This still decays to zero by the ex date (as it did with GOOGL). For each successive split the pop on announcement is less and less and eventually falls to zero. This same phenomena is observed with dividend announcements and reverse splits. The countercase is Berkshire Hathaway, which has never split and has significantly outperformed the market. The punchline is that a pizza that is comprised of 8 slices is the same amount of pizza as the same pizza that is comprised of 4 slices. [/QUOTE]
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SVTPerformance's Chain of Restaurants
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