Abstract
An analysis of real estate investment trust (REIT) stock splits is presented. Evaluation of the initial reaction to split REITs supports efficient market pricing where REITs generate statistically significant positive announcement date returns, no statistically significant record date returns, and muted ex-date returns. In the long-term, split REITs do not consistently out perform benchmark portfolios over one-year, two-year, and three-year periods. REITs split subsequent to a substantial run up in stock price and to improve the position of their post split stock price relative to the stock price of the typical REIT.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Anshuman, V. R., and A. Kalay. (2002). “Can Splits Create Market Liquidity? Theory and Evidence,” Journal of Financial Markets 5, 83–125.
Barber, B., and J. Lyon. (1997). “Detecting Long-Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics,” Journal of Financial Economics 43, 341–372.
Bhasin, V., R. A. Cole, and J. K. Kiely. (1997). “Changes in REIT Liquidity 1990–1994: Evidence From Intra-Day Transactions,” Real Estate Economics 25, 615–630.
Boehme, R. D., B. R. Danielsen, and S. M. Sorescu. (2003). “Stock Split Post-Announcement Returns: Underreaction or Market Friction?” University of Houston Working Paper.
Bradley, M., D. R. Capozza, and P. J. Seguin. (1998). “Dividend Policy and Cash Flow Uncertainty,” Real Estate Economics 26, 555–580.
Brennan, M. J., and T. E. Copeland. (1988). “Stock Splits, Stock Prices, and Transaction Costs,” Journal of Financial Economics 22, 83–101.
Byun, J., and M. S. Rozeff. (2003). “Long-Run Performance After Stock Splits: 1927 to 1996,” Journal of Finance 58, 1063–1085.
Capozza, D. R., and P. J. Seguin. (2003). “Inside Ownership, Risk Sharing and Tobin’s q-Ratios: Evidence From REITs,” Real Estate Economics 31, 367–404.
Desai, H., and P. C. Jain. (1997). “Long-Run Common Stock Returns Following Stock Splits and Reverse Splits,” Journal of Business 70, 409–433.
Fama, E. F. (1998). “Market Efficiency, Long-Term Returns, and Behavioral Finance,” Journal of Financial Economics 49, 283–306.
Fama, E. F., and K. R. French. (1992). “The Cross-Section of Expected Stock Returns,” Journal of Finance 52, 427–465.
Fama, E. F., and K. R. French. (1993). “Common Risk Factors in the Returns on Stocks and Bonds,” Journal of Financial Economics 33, 3–56.
Fama, E. F., L. Fisher, M. C. Jensen, and R. Roll. (1969). “The Adjustment of Stock Prices to New Information,” International Economic Review 10, 1–21.
Grinblatt, M. S., R. W. Masulis, and S. Titman. (1984). “The Valuation Effects of Stocks Splits and Stock Dividends,” Journal of Financial Economics 13, 461–490.
Ikenberry, D. L., and S. Ramnath. (2002). “Underreaction to Self-Selected News Events: The Case of Stock Splits,” Review of Financial Studies 15, 489–526.
Ikenberry, D. L., G. Rankine, and E. K. Stice. (1996). “What Do Stock Splits Signal Anyway?” Journal of Financial and Quantitative Analysis 31, 357–377.
Kallberg, J. G., C. H. Liu, and A. Srinivasan. (2003). “Dividend Pricing Models and REITs,” Real Estate Economics 31, 405–434.
Lakonishok, J., and B. Lev. (1987). “Stock Splits and Stock Dividends: Why, Who and When,” Journal of Finance 42, 913–932.
Lamoureux, C. G., and P. Poon. (1987). “The Market Reaction to Stock Splits,” Journal of Finance 42, 1347–1370.
Lee, C. F., and J. B. Kau. (1987). “Dividend Payment Behavior and Dividend Policy in REITs,” Quarterly Review of Economics and Business 27, 6–21.
Maloney, M. T., and J. H. Mulherin. (1992). “The Effects of Splitting on the Ex: A Microstructure Reconciliation,” Financial Management 21, 44–59.
McNichols, M., and A. Dravid. (1990). “Stock Dividends, Stock Splits, and Signaling,” Journal of Finance 45, 857–879.
Mitchell, M. L., and E. Stafford. (2000). “Managerial Decisions and Long-Term Stock Price Performance,” Journal of Business 73, 287–329.
Nayar, N., and M. S. Rozeff. (2001). “Record Date, When-Issued, and Ex-date Effects in Stock Splits,” Journal of Financial and Quantitative Analysis 36, 119–139.
Nelling, E. F., J. M. Mahoney, T. L. Hildebrand, and M. A. Goldstein. (1995). “Real Estate Investment Trusts, Small Stocks and Bid-Ask Spreads,” Real Estate Economics 23, 45–63.
So, R. W., and Y. Tse. (2000). “Rationality of Stock Splits: The Target-Price Habit Hypothesis,” Review of Quantitative Finance and Accounting 14, 67–84.
Titman, S. (2002). “Discussion of Underreaction to Self-Selected News Events,” Review of Financial Studies 15, 527–531.
Wang, K., J. Erickson, and G. W. Gau. (1993). “Dividend Policies and Dividend Announcement Effects for Real Estate Investment Trusts,” Journal of the American Real Estate and Urban Economics Association 21, 185–201.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Hardin, W.G., Liano, K. & Huang, GC. REIT Stock Splits and Market Efficiency. J Real Estate Finan Econ 30, 297–315 (2005). https://doi.org/10.1007/s11146-005-6409-8
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11146-005-6409-8