Increases in volatility of returns after a stock split have mostly vanished: a reappraisal of Ohlson and Penman,1985

This paper revisits and extends the analysis in Ohlson and Penman (1985). Their study reported an arbitrary increase in volatility of returns after a stock split. We replicate these results and extend the sample to cover from 1962 to 2022. We find that increases in volatility subside after the 2001 minimum tick size change. We also find that the spread size in relation to the price can partially explain the increases in volatility. Additionally, we present evidence that declines in spreads are correlated with declines in broker profits and may have removed incentives used by firms to promote their stocks through splits which could result in a decline in stock split executions.