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> The market has been so weird recently that stock splits - which according to previous theoretical belief do not create shareholder value - have in fact increa

> The market has been so weird recently that stock splits - which according to previous theoretical belief do not create shareholder value - have in fact increased the share price for extended periods You're right that theoretically, they shouldn't create value, but I think even back to the 80s and 90s it's been shown that companies that go through a split tend to out perform the market for years after the split. The main reason isn't that the split creates value, but rather that companies who go though a stock split are usually successful and already on a trajectory to beat the market, split or not.

hackernewds 4y ago
So that selection bias seems to project that buying before a share split is actually not an educated+good decision
- and-not-drew 4y ago
  I think it still is. I'm going to try to find a source, but I saw an analysis where they measured from a year before the split, the day the split was announced, and the day the split was executed all until one year after the split was executed and the returns on all of them beat the market as a whole. That being said, holding before the announcement performed the best.
  - Majromax 4y ago
    > I'm going to try to find a source, but I saw an analysis where they measured from a year before the split, There's a bit of time travel / survivor bias with this one. A company that has not beaten the market is much less likely to split its stock. In other words, if I know nothing other than that a company is splitting its stock, I can reasonably guess that it's shown good returns in recent history.
    - and-not-drew 4y ago
      Yeah, that was their whole point. Stock splits don't cause better returns, but the stocks with the best returns are more likely to split.
JumpCrisscross 4y ago
> even back to the 80s and 90s it's been shown that companies that go through a split tend to out perform the market for years after the split Going back to the late 60s [1]. [1] https://www.researchgate.net/profile/Hemang-Desai-2/publication/24103263_Long-Run_Common_Stock_Returns_Following_Stock_Splits_and_Reverse_Splits/links/09e415134b26959673000000/Long-Run-Common-Stock-Returns-Following-Stock-Splits-and-Reverse-Splits.pdf https://www.researchgate.net/profile/Hemang-Desai-2/publicat...

hackernewds 4y ago

So that selection bias seems to project that buying before a share split is actually not an educated+good decision

and-not-drew 4y ago
I think it still is. I'm going to try to find a source, but I saw an analysis where they measured from a year before the split, the day the split was announced, and the day the split was executed all until one year after the split was executed and the returns on all of them beat the market as a whole. That being said, holding before the announcement performed the best.
- Majromax 4y ago
  > I'm going to try to find a source, but I saw an analysis where they measured from a year before the split, There's a bit of time travel / survivor bias with this one. A company that has not beaten the market is much less likely to split its stock. In other words, if I know nothing other than that a company is splitting its stock, I can reasonably guess that it's shown good returns in recent history.
  - and-not-drew 4y ago
    Yeah, that was their whole point. Stock splits don't cause better returns, but the stocks with the best returns are more likely to split.

JumpCrisscross 4y ago

> even back to the 80s and 90s it's been shown that companies that go through a split tend to out perform the market for years after the split Going back to the late 60s [1]. [1] https://www.researchgate.net/profile/Hemang-Desai-2/publication/24103263_Long-Run_Common_Stock_Returns_Following_Stock_Splits_and_Reverse_Splits/links/09e415134b26959673000000/Long-Run-Common-Stock-Returns-Following-Stock-Splits-and-Reverse-Splits.pdf https://www.researchgate.net/profile/Hemang-Desai-2/publicat...