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The stock has gained 26,920% over the past decade (as of this writing), prompting management to initiate a 10-for-1 stock split earlier this year -- after a 4-for-1 split in 2021.
The average return after a stock split is announced in the year that follows is 25.4%. That's about a 13% greater return than the market over the same period. This chart lays it out nicely.
First let's talk about the stock market's performance this year. The S&P 500 roared into the new year by confirming its presence in a bull market and went on to hit multiple record highs.
The most common theory explaining this phenomenon is that individual investors, who are income tax-sensitive and who disproportionately hold small stocks, sell stocks for tax reasons at year end (such as to claim a capital loss) and reinvest after the first of the year. Another cause is the payment of year-end bonuses in January.
The main effect of stock splits is an increase in the liquidity of a stock: [3] there are more buyers and sellers for 10 shares at $10 than 1 share at $100. Some companies avoid a stock split to obtain the opposite strategy: by refusing to split the stock and keeping the price high, they reduce trading volume.
The factor is changed whenever a constituent company undergoes a stock split so that the value of the index is unaffected by the stock split. First calculated on May 26, 1896, [ 2 ] the index is the second-oldest among U.S. market indices, after the Dow Jones Transportation Average .
The pairs trade helps to hedge sector- and market-risk. For example, if the whole market crashes, and the two stocks plummet along with it, the trade should result in a gain on the short position and a negating loss on the long position, leaving the profit close to zero in spite of the large move.
A stock represents a piece of ownership in a corporation. Stocks are also known as equities, which signifies that anyone who owns them has a stake in the company’s performance.
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