Price-Based Return Comovement

In one sentence

Investors appear to group companies based on their stock-price levels. This can cause excess-comovement.

Summary

We find that, shortly after a stock conducts a 2-for-1 split, the stock starts co-moving more with lower-priced stocks and less with higher-priced stocks. This shift occurs after the effective date of the split and not on (or before) the announcement date. Our results suggest that investors group companies based on stock-price levels and that flows across categories induce comovement beyond fundamentals.

Research topics