Abstract
AbstractWe analyze retail trading around both forward and reverse stock splits. While some suggest stock splits align prices in an optimal range, which results in disperse ownership with more persistent retail investor participation, Minnick and Raman suggest that the lack of retail trader participation mitigates the use of splits to align prices in an optimal range and contributes to decreased use of stock splits. We determine if stock splits still attract more retail trading as suggested by the optimal price range hypothesis. Our results suggest stock splits are not a “one size fits all” method for attracting retail traders. Whether retail trading is transitory or permanent for forward and reverse stock splits is dependent upon price.
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