News and noise: do investors react to stock split announcements differently during periods of high and low market volatility?

In this paper, we find evidence that stock split announcements have a greater wealth effect when market volatility, as measured by the VIX index, is low. This effect is driven primarily by small firms. These results support the hypothesis that when market volatility is high, signals sent by small fi...

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Bibliographic Details
Published in:Journal of economics and finance 2011, Vol.35 (1), p.71-78
Main Authors: Johnson, Steve, Stretcher, Robert
Format: Article
Language:English
Subjects:
Abnormal Returns
Economics
Economics and Finance
Event Study
Finance
G14
Hypotheses
Information
Macroeconomics/Monetary Economics//Financial Economics
Noise
Rates of return
Regression analysis
Securities markets
Stock exchanges
Stock Splits
Studies
Variables
VIX
Volatility
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Summary:In this paper, we find evidence that stock split announcements have a greater wealth effect when market volatility, as measured by the VIX index, is low. This effect is driven primarily by small firms. These results support the hypothesis that when market volatility is high, signals sent by small firms are more likely to be obscured by noise than when market volatility is low.
ISSN:1055-0925
1938-9744
DOI:10.1007/s12197-009-9115-1