Regression Analysis of an Announcement of a Stock Split with Fama and French Factors
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When the standard event study is expanded using the Fama and French factors in the regression analysis of the market reaction to a stock split, significant post-split excess returns are observed on the day of the announcement for smaller firms. Larger firms, on the other hand do not report significant returns. This suggests that smaller firms experience a greater reaction than larger firms. When separated by book-to-market quintiles, only the returns for value stocks were significant at the 1% level. This indicates that only value stocks are significantly affected by an announcement of a stock split.