03. Corporate Actions: Stock Splits

Aside : Although a stock split shouldn’t theoretically affect the market cap of a stock, in reality it does! There are some intriguing behavioral patterns that researchers have observed among traders. One seems to suggest that after a stock splits, and the price drops considerably, people seem to think it is going to go back up to the previous price (double or triple)! This creates an artificial demand for the stock, which in turn actually pushes up the price.