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Title: What do stock price levels tell us about the firms?
Authors: Chan, KN
Li, FF
Lin, JC 
Lin, TC
Keywords: Stock price level
Price informativeness
Future earnings
Stock splits
Issue Date: 2017
Publisher: North-Holland
Source: Journal of corporate finance, 2017, v. 46, p. 34-50 How to cite?
Journal: Journal of corporate finance 
Abstract: We hypothesize that high stock price levels impede informed trading on the stocks and reduce price informativeness. This is because uninformed trading is needed to facilitate informed trading, and high stock prices may impose budget constraints on uninformed investors. Indeed, we find, for high-price firms, (i) options to stock trading volume (O/S), an informed trading measure in options market, is higher, (ii) price informativeness about future earnings is lower, and (iii) investment sensitivity to price is lower. We also find these patterns reverse after stock splits, suggesting that firms can use splits to improve informed trading and enhance price informativeness.
ISSN: 0929-1199
EISSN: 1872-6313
DOI: 10.1016/j.jcorpfin.2017.06.013
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