After Alphabet, Apple and Tesla, now Amazon!

What does this mean for the stock market?

Based on The Wall Street Journal research, traditionally Stocks in the USA500 rise 5% in the year following share splits, including 2.5% immediately following the announcement according to research from Nasdaq Inc. on splits between 2012 and 2018.

This year things might be slightly different, since outsized reactions have been seen in the stock market due to external factors including a psychological component during a dismal year full of uncertainties and risks.

Generally however a stock split does not affect the broader stock market, with the Dow Jones Industrial Average being an exception since its value is not weighted by its components’ market value, but by its components’ share price value since it is a price-weighted index. The higher the share price, the bigger the influence that stock has over the Dow’s daily price swings.

 

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Andria Pichidi

Market Analyst

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