This paper is published in Volume-4, Issue-3, 2018
Area
Finance
Author
Dr. Swapna Sen
Org/Univ
Jagannath International Management School, Kalkaji, New Delhi, India
Pub. Date
14 June, 2018
Paper ID
V4I3-1764
Publisher
Keywords
Stock split, Volatility, Liquidity, CAPM return, Abnormal return, Beta

Citationsacebook

IEEE
Dr. Swapna Sen. Stock split and its impact on stock market – Evidence from Indian stocks, International Journal of Advance Research, Ideas and Innovations in Technology, www.IJARIIT.com.

APA
Dr. Swapna Sen (2018). Stock split and its impact on stock market – Evidence from Indian stocks. International Journal of Advance Research, Ideas and Innovations in Technology, 4(3) www.IJARIIT.com.

MLA
Dr. Swapna Sen. "Stock split and its impact on stock market – Evidence from Indian stocks." International Journal of Advance Research, Ideas and Innovations in Technology 4.3 (2018). www.IJARIIT.com.

Abstract

The study attempted to assess the impact of the stock split on the stock price, volatility, and liquidity. To do this a sample of 365 companies are considered which has undergone split during the period 2011 to 2017. The paired t-test is carried out for pre and post values of Mean Return, Volatility, Beta, Sharpe’s Ratio, Treynor Ratio, CAPM Return, Abnormal Return, and Liquidity to assess the impact of the split event on the stock performance. Overall results say that there is a drop in stock returns and increase in volatility after the split. There is no significant change in liquidity with the split. But when the analysis is done separately for costly and cheap stocks, it revealed that for costly stocks, there is the drop in returns, there is no further worsening of volatility and significant improvement in liquidity post-split. Thus split is effective to some extent only for costly stocks in terms of increase in the volume of trades after the split. Otherwise, this corporate action is not of any positive impact on wealth creation, volatility or liquidity.