Jared Woodard, Head of the Research Investment Committee at Bank of America Securities, argues that stock splits can be very positive for shares. Woodard’s research found that in the 52 weeks after a company completed a stock split, its average return was over 25%. This far exceeded the average return of the S&P 500 of under 12%.
However, the research also shows that, on average, these stocks were already doing much better than the index before splitting. This raises the question: did the stock split actually cause the outperformance? Or did these stocks just keep the momentum they already had before the split? Either way, stock splits remain interesting events to pay attention to due to this potential for outperformance.
