Are Nominal Stock Price Anchors a Global Phenomenon?
What is it about?
Weld, Michaely, Thaler, and Benartzi (2009) find that the average nominal stock price on the New York Stock Exchange and the American Stock Exchange has been approximately $25 since the Great Depression. They report that this “nominal price fixation is primarily a U.S. or North American phenomenon.” Using a larger data set from 38 countries, we show that nominal prices of most stocks tend to revert to their initial public offer (IPO) prices. IPO prices are natural anchors because they are the first public prices observed by investors. We demonstrate that corporate actions maintain these nominal stock price anchors.
Why is it important?
The motivations for stock splits are not well-understood. One claim, and a popular one, is that firms try to target their stock prices towards a nominal anchor. Our paper is the first to show that this happens in stock markets all over the world and not just in the U.S. (as previously documented).
The following have contributed to this page: Professor Utpal Bhattacharya and Professor Kee-Hong Bae