A Study of the Liquidity Effects of Stock Spits in Indian Stock Markets

Abstract

Stock-split are a new phenomenon in Indian markets, especially with the bull phase in Indian stock markets, with many companies' stock prices shooting far beyond the normal trading range. The objective of the study is to analyze the overall impact of stock splits on returns. To do so, the returns in the period prior to the announcement are compared with the returns after the execution of the split, in terms of mean returns and variance of returns. The results of the study indicate strong evidence for an increase in the liquidity of the stock after the split.