The effect of the prolonged bull market on the market response to large and small stock distributions

A widely cited finding from Grinblatt et al. (1984) (hereafter GMT) is that the market response to the announcement of a small stock distribution is greater than the response to a large one. However, the GMT result is not found for distributions declared from the early 1980s through the end of the 1990s. We examine whether the bull market of 1982 through 2000 may have contributed to the attenuation of the GMT result. We hypothesise that the bull market affected the value and credibility of signals from management. These changes in the quality of the signals changed the association between the predistribution share price and the market's response to the distribution, which altered the GMT result. The evidence is consistent with our hypothesis.