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A Note on Affordability and the Optimal Share Price
Author(s) -
Chittenden William T.,
Payne Janet D.,
Toles J. Holland
Publication year - 2010
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2009.00243.x
Subject(s) - economics , stock (firearms) , inflation (cosmology) , monetary economics , falling (accident) , stock price , stock market , financial economics , microeconomics , physics , environmental health , horse , series (stratigraphy) , theoretical physics , engineering , biology , mechanical engineering , medicine , paleontology
Despite the increase in institutional ownership, decreased trading costs, and increased real personal savings, we find that the average stock price is lower today than it was in the 1920s. In the aggregate, the propensity to split is a function of recent market performance, personal savings, and the desirability of appearing to be a small firm. Our results indicate that, after decades of inflation and the average stock price falling, splitting stocks to return to an “affordable” trading range must be rejected as an explanation. This suggests that other economic forces are behind splits, whether traditional or behavioral in nature.