Abstract
Market behavior around split ex-dates is examined for stocks listed on the Toronto Stock Exchange (TSE). The mean abnormal return on the split ex-date is significant and positive using traditional event-study techniques, and insignificant for conditional residual variances modelled using various ARCH processes. The mean beta increase post-split ex-date becomes insignificant using various ARCH processes. The significant increase in the observed return variance on the split ex-date appears to be caused by increased noise, and not increased true return variance. The changes in observed variances are positively related to the changes in relative bid-ask spreads and raw trading volumes.
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