To: On the QT who wrote (97578 ) 2/12/1999 7:24:00 AM From: GVTucker Read Replies (3) | Respond to
QT, thanks for the reasoned rebuttal.<<Do you know if Ford Investor Services is in anyway referring to Ikenberry at Yale? Does Ikenberry admit to a flawed study? What are these adjustments that Ikenberry should have made and did not?>> theory of MPT, mind you, just that the concept of beta needs to be changed somehow.) Thus, to use an extreme example, a stock like Yahoo! should have a greater expected return than a stock like General Motors, and a split has nothing to do with this return. Secondly, Ikenberry's archive research didn't take into account stocks that were delisted. The result is that some of the 'bad' companies were not included, whereas all of the 'good' companies were included. As opposed to my point as to risk, this factor unquestionably skews the data. For example, odds are that COPY will go away some time in the next 5 years. When it does, it won't pop up on the stock history databases. Thus, COPY's poor performance with 2 splits won't appear. A couple of pieces of data that Ikenberry did adjust for, but most studies friendly to stock splits do not, is concomitant information released such as earnings and dividends. This is a basic flaw in these studies. I do not know whether Ford Investor Services adjusted its data for these factors or not. But given the magnitude that they claim (4 or 5 percentage points) my guess is that they did not adjust for these simple factors. Note that Ikenberry did not measure near this degree of outperformance.<<What are the name of these studies and where can we view them? >> not a 'true fact statement'. It is an arguable opinion.
