Article1994

Market Microstructure and the Ex-Date Return

42 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

ABSTRACT This article examines the role of measurement biases, due to order flow effects, in abnormal split ex‐day returns. We conjecture that postsplit orders consist of numerous small buyers and fewer larger sellers. This change in order flow causes closing prices to occur more frequently at the ask price, consistent with Maloney and Mulherin (1992) and Grinblatt and Keim (1991) . In addition, this change causes specialists' spreads to increase, perhaps to offset larger average inventories. We examine both NYSE and NASDAQ samples and find that order flow biases can explain approximately 80 percent (48 percent) of the NYSE (NASDAQ) ex‐day return.

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References

1987A Simple Model of Capital Market Equilibrium with Incomplete Information 1981Optimal dealer pricing under transactions and return uncertainty 1987The Market Reaction to Stock Splits 1979Liquidity Changes Following Stock Splits 1984On interpreting security returns during the ex-dividend period 1989Trading patterns, bid-ask spreads, and estimated security returns 1990The Effects of Stock Splits on Bid-Ask Spreads 1980Management's View of Stock Splits

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2002The Market Reaction to Stock Splits — Evidence from Germany 2009The Impact of Clientele Changes: Evidence from Stock Splits 2001Volatility, autocorrelations, and trading activity after stock splits 2001Record Date, When-Issued, and Ex-Date Effects in Stock Splits 2017Ex-Day Returns of Stock Distributions: An Anchoring Explanation 1998Fragmentation, competition, and limit orders: New evidence from interday spreads

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