2007-05-27 08:26:54 · 6 answers · asked by rich k 1 in Business & Finance ➔ Investing
"In two studies by David Ikenberry that covered more than twenty years, stocks that split outperformed the market by 8% in the year they split and by 12% in the next three years."
That's info from Dow Theory Forecast.
Happened to be posted on a message board, the absolute truth of it I do not know...maybe " google" those two names and see if they're reliable ?
2007-05-27 10:21:56 · answer #1 · answered by jebediabartlett 6 · 0⤊ 0⤋
A decision is made to split a stock for various reasons, but usually when it is taken, the price will jump immdeiately before the split.. ie. if the price is say 300 and a decision is taken to split, the price will jump to say 330, then split to let says 10 to 1 to 33bucks a share.
Trading will commence thereafter, and immediate interest is shown in the share and it will jump further from 33 to say 40.
Usually interest will wane in share and it will settle down to say 36bucks.
If however, the share is something very interesting, something like let's say Bershire Hatheway deciding to split 100000 to 1, can you imagine how this share will increase 10 fold within the month.
So it does depend on the share, if it is a premium share, hold it - if it is just an ordinary share that they want to make more affordable and increase interest and volumes, then the price will settle after the initial split.
If you decide it's an ordinary share, you can sell and buy back when it falls after the hype has died down.
If it's a share of significance, hold.
2007-05-27 15:45:01 · answer #2 · answered by Qi 3 · 0⤊ 0⤋
Stocks do tend show positive alpha over days, weeks, and months following a split. (I.e., they appreciate more than the market overall.) The most likely reason for this is that companies only split when they believe they are on firm footing to continue to appreciate -- no reputable company likes to float shares that are priced very low.
However, as others have noted, this is a weak statistical effect. You would NEVER want to trade based on this trend alone.
2007-05-27 16:34:44 · answer #3 · answered by David B 2 · 0⤊ 0⤋
It doesn't matter, any impact of a split (upwards or downwards) would only be very temporary anyway, and you would have to "time it right" to benefit, which is basically just "trading", and NO-ONE deliberately makes money trading, just a very few very lucky people.
Splits make no difference. Would you rather own a two-dollar bill or two one-dollar bills?
However, the fact that a stock is splitting can indicate it has "outgrown" it's shareholders comfortable price range, and that the split is to improve liquidity. That's often quite a good sign.
(I keep waiting for my single share of BRK-A to split, do you think it will move up or down after it does? LOL)
2007-05-27 16:05:40 · answer #4 · answered by Anonymous · 1⤊ 1⤋
Theoretically after a split, more people can afford them and jump in, causing stock price to move up.
2007-05-27 15:31:57 · answer #5 · answered by smiling_freds_biz_info 6 · 1⤊ 0⤋
to actually bet on this, you'd best check what the particular stock actually did the last few times it split.
"Both" is frequently the correct answer.
Which would mean that you'd best have a serious trading plan and execute it perfectly.
2007-05-27 15:31:40 · answer #6 · answered by Spock (rhp) 7 · 0⤊ 3⤋