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Beta Changes around Stock Splits Revisited

Published online by Cambridge University Press:  06 April 2009

James B. Wiggins
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Abstract

Recent papers by Lamoureux and Poon (1987) and Brennan and Copeland (1988) document a significant permanent increase in average beta subsequent to stock split ex-dates. This paper demonstrates that the shift in estimated beta following ex-dates decays as the measurement interval is lengthened. There is no statistically significant difference between pre- and post-split betas using the Scholes-Williams (1977) estimator and weekly return data, or using monthly returns. We conclude that Lamoureux and Poon's and Brennan and Copeland's results can be attributed to a bias created by using too short a return measurement interval to estimate beta.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 27 , Issue 4 , December 1992 , pp. 631 - 640
Copyright
Copyright © School of Business Administration, University of Washington 1992

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