By: Marcus Sickert, Bachelor of Commerce student, concentration in Finance

This summer I was afforded the opportunity to work alongside professors Yuriy Zabolotnyuk (Associate Professor, Finance) and Isaac Otchere (Professor, Finance) as a research assistant analyzing short-term market reactions following stock splits. As a fourth-year student concentrating in Finance, I found this topic both interesting and educational and believe much of the knowledge I have gained during the research process will be applicable towards my future career in business.

Before working on this paper, I had experience conducting research through my involvement on the Sprott Student Investment Fund, and several fourth-year finance classes. Although these experiences provided me with a solid foundation of the academic research process, I wanted to further my capacity as a researcher and saw the Sprott Summer Research Experience as an excellent opportunity to do so.

The purpose of my research was to perform a meta-analysis collecting data specific to short term cumulative abnormal returns surrounding stock split events. The explicit type of meta-analysis that was used is referred to as replication analysis. In this replication analysis, a regression analysis was conducted to summarize a wide range of existing published findings.

Marcus Sickert, 4th year undergraduate student, Sprott School of Business

But what are stock split events, and what data points was I looking for? Stock splits are events that occur when companies listed on publicly traded exchanges decide to increase the number of outstanding shares available to the public by dividing each share and ultimately reducing its price. For example, if one share of Apple Inc. is currently worth $200 and the company decides to perform a 2-for-1 stock split, current shareholders will receive two shares of the stock now valued at $100. It may seem rational that if a stock splits 2-for-1 the number of shares double while the price is halved. However, this logic rarely holds and due to a variety of signalling factors including increased affordability, changed perception of the firm, and perceived wealth creation for current investors the split leads to a change in investor psychology resulting in a share price that deviates slightly from the half-way mark.

But how much does the price deviate? Well, my role as a researcher was to collect data from various financial journal articles and working papers that report this abnormal price movement and summate the findings. These findings will then be used to assist Professor Zabolotnyuk and Professor Otchere’s research on stock splits by providing them with the raw data to support their meta-analysis paper.

Overall, this summer’s research project was an excellent experience. It allowed me to work closely with two of Sprott’s leading researchers who taught me a variety of new research techniques and about the importance of being meticulous in my work. Furthermore, I believe that participating in this research gave me a huge step up in my professional career by demonstrating to prospective employers my credibility, willingness to learn, and acceptance of new challenges. I would highly recommend the Sprott Summer Research Experience to anyone interested in exploring the world of academic research beyond the classroom as it provides a fun and intellectually challenging opportunity like no other.

Tuesday, September 24, 2019 in , ,
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