Stock Splits: Evidence from Mutual Funds

Mutual fund splits occur in high‐priced funds after unusually high returns. Split factors are related to the deviation of a fund's price from the mean of all fund prices. Post‐split prices are below the mean of other funds' prices. Post‐split numbers of shareholders and assets do not increase compared with funds having similar rates of asset growth. However, I find evidence that mutual fund splits bring per account shareholdings back up to normal levels. I argue that signaling, liquidity, and tick size theories do not apply to mutual fund splits.