If a Firm Declares a 20:1 Stock Split,and the Pre-Split

question 54

True/False

If a firm declares a 20:1 stock split,and the pre-split price was $500,then we might expect the post-split price to be $25.However,it often turns out that the post-split price will be higher than $25.This higher price could be due to signaling effects investors believe that management split the stock because they think the firm is going to do better in the future.The higher price could also be because investors like lower-priced shares.

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Definitions:

Antecedent

An event or environment condition that precedes and triggers a behavior or response.

Ellis's ABC

A cognitive-behavioral therapy model developed by Albert Ellis, focusing on the relationship between beliefs (B), consequences (C), and activating events (A).

Activating Events

Situations or experiences that trigger a psychological response, often discussed in cognitive-behavioral therapy to address emotional reactions.

Unresolved Conflicts

Psychological term referring to internal or external disputes that an individual fails to find a resolution for, often leading to stress or psychological discomfort.