One of the major premises of efficient market theory is that the market quickly impounds any publicly available information, including macroeconomic information, that might be used to predict stock prices. It is only new-and especially new and unpredictable-information that moves prices, and yet many studies examine only announcements that have a predictable component. Researchers typically select a proxy for the anticipated portion of the news announcement and then test the market's reaction to the unanticipated portion of the announcement. However, the process of separating the anticipated and unanticipated portions of news announcements is critical to conclusions that can be drawn about price changes, the speed of adjustment, and trading activities. We avoid this separation problem by looking at fully unanticipated events. * We would like to thank Laura Starks and an anonymous referee for helpful suggestions, Ron Howren for computer support, Eric Schuster and Bob Hebert for gathering the sample, and Sandra Sizer Moore for editorial assistance. Ajay Patel thanks the Research Fellowship Program at Wake Forest University's Babcock Graduate School of Management for partial support of this project. Tie Su acknowledges financial support from the Research Council, University of Miami. The usual disclaimer applies.

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The increases in volatility after stock splits have long puzzled researchers. The usual suspects of discreteness and bid-ask spread do not provide a complete explanation. We provide new clues to solve this mystery by examining the trading of when-issued shares that are available before the split. When-issued trading permits noise traders to compete with a more homogenous set of traders, decreasing the volatility of the stock before the split. Following the split, these noise traders reunite in one market and volatility increases. Thus, the higher volatility after the ex date of a stock split is a function of the introduction of when-issued trading, the new lower price level after the split date, and the increased activity of small-volume traders around a stock split. 2004 The Southern Finance Association and the Southwestern Finance Association.

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In this paper I re‐examine spreads around dividend and earnings announcements and provide new evidence on patterns by examining the components of the bid‐ask spread. Transaction data are examined through a recently developed spread decomposition model that decomposes the bid‐ask spread into a fixed (execution) component and an adverse selection component. In addition, this model does not rely on a constant spread as previous spread decomposition models require. The results show that around earnings announcements, the bid‐ask spreads and spread components have significant changes indicating that the anticipated announcement is informative. However, the actual public announcement of a dividend does not alter the bid‐ask spread and spread components of actively traded securities.