Abnormal Returns and Stock Splits: The Decimalized vs. Fractional System of Stock Price Quotes
Stock splits have been an anomaly in the world of finance since their inception. Despite the fact that stock splits themselves do not inherently create any value for the firm, investors see stock splits as positive and the companies that declare them as better investments than ones that do not. With the inception several years ago of the decimalized system of stock price quotations, it remains to be seen if stock splits will continue to be seen as such, and if so, to a greater or lesser degree as under the fractional quote system. It seems that despite a reduction in transaction costs under the new system, there again appears to be no long-term benefit to splitting.