Abstract
We examine the relation between trading activity, return volatility, and autocorrelations around stock splits. Prior research shows substantial increases in volatility and number of small trades after splits. We show that these two effects are significantly positively related, and find evidence of bi-directional Granger causality. We also show that first-order serial autocorrelations decline significantly after splits. The decline in autocorrelations is significantly related to the change in the number of small trades. In contrast, for control samples of non-splitting firms, changes in volatility and autocorrelations are not associated with changes in small trades.
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