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Investor sentiment and return comovements: Evidence from stock splits and headquarters changes

Kumar,A.
; 
Page,J.
; 
Spalt,O.G.
Abstract
We examine whether the trading activities of retail and institutional investors cause comovements in stock returns. Around stock splits, retail trading correlations (RTCs) decrease with stocks in the presplit price range and increase with stocks in the post-split price range. These shifts in RTCs induce changes in return comovements. In the cross section, return comovements among low-priced stocks are amplified when retail trades are more correlated and when aggregate uncertainty amplifies behavioral biases. We find similar patterns among local stocks and when firms change their corporate headquarters. In contrast to retail trading, institutional trading attenuates return comovements.
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2013
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Tilburg University Research Output Collection
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Kumar, A, Page, J & Spalt, O G 2013, 'Investor sentiment and return comovements : Evidence from stock splits and headquarters changes', Review of Finance, vol. 17, no. 3, pp. 921-953. https://doi.org/10.1093/rof/rfs010
URI
https://hdl.handle.net/20.500.14602/60141
License
info:eu-repo/semantics/restrictedAccess
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