Let us have it. But stocks typically receive a quick boost when they're added to a major index and go down a little when they're kicked out. As a result, money managers frequently load up on new additions and dump stocks that are removed.
Studies confirm that splits are good for share prices.
But there are explanations for the outperformance. By reducing the share price, splits make it easier for small investors to buy 100-share round lots, boosting demand for the stock. In addition, no company wants to split its stock and then watch it crash. So a company's top managers aren't likely to authorize a split unless they are optimistic about the future. Of course, management confidence means more for blue chips than for start-ups, which may well disappoint even their own insiders.