Who Wants to Trade Around Ex-dividend Days?

Hu, Sheng Cheng; Tseng, Yun-lan

doi:10.2139/ssrn.675243

Cited by 4 publications

(3 citation statements)

References 28 publications

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“…2 2 Alternative explanations for the ex‐day anomaly include transaction costs (Kalay, 1982), discrete tick sizes (Bali and Hite, 1998), and asymmetric limit order adjustment (Dubofsky, 1992; Jakob and Ma, 2004, 2005). Hu and Tseng (2006) also provide evidence that small investors tend to sell before and buy after ex‐dates, even for nontaxable stock dividends. While these nontax explanations have merit, our study is limited in scope to testing the tax model in light of the historical evidence. …”

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confidence: 82%

Do Tax Law Changes Influence Ex‐Dividend Stock Price Behavior? Evidence from 1926 to 2005

Whitworth

Rao

2010

Financial Management

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"We test the Elton and Gruber model of ex-dividend stock pricing over a period spanning all US tax law changes since 1926. Our results indicate that price drop ratios (ΔP/D) and ex-day returns are related to dividend and capital gains tax rates in the theorized manner. Consistent with tax clienteles, we also find that ex-day price movements of higher dividend yield stocks are driven more by corporate tax rates, while lower yield stocks are more influenced by personal rates. Finally, we demonstrate that the positive relationship between ΔP/D and the dividend yield becomes stronger as the tax differential | td - t cg | widens." Copyright (c) 2010 Financial Management Association International.

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confidence: 82%

Do Tax Law Changes Influence Ex‐Dividend Stock Price Behavior? Evidence from 1926 to 2005

Whitworth

Rao

2010

Financial Management

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“…The application of the above filters produces a sample of 987 ex-dividend eve analyses of price, trading volume and buy-sell imbalance by different groups of 8 In a related study, Hu and Tseng (2006) use the same dataset as ours but they examine a sample of 111 stock dividends for firms in Taiwan stock market in 1999. Because a large proportion of stock dividends are not subject to dividend tax, and other non-tax factors are related to stock dividends, they conclude that the tax is neither a necessary condition nor an important factor for the ex-day PDR for stock dividends.…”

Section: Samplementioning

confidence: 99%

Ex-dividend prices and investor trades: Evidence from Taiwan

Chen

Chow

Shiu

2013

Pacific-Basin Finance Journal

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Based upon an examination of 987 ex-dividend events that took place on the Taiwan Stock Exchange between January 1992 and December 2006, we find that differential taxes are an important factor in terms of their effects on share prices and the behavior of investors around the ex-dividend day. Ex-day price drop ratio increases with the average investor's preference for dividend relative to capital gains. Excess volume around the ex-dividend day is positively correlated with the degree of tax heterogeneity and the gains from dividend-capturing activities, and is negatively associated with arbitrage risk and transaction costs. We also find that wealthy investors sell shares cum-dividend, subsequently reversing to buy shares on the ex-dividend day, whereas less wealthy investors, proprietary traders and corporate shareholders trade in the opposite direction.Overall, our results provide support for the dynamic dividend clientele hypothesis. JEL classification: G35

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“…Empirical verification of tax capitalization has proceeded across three distinct paths: tests of Brennan's (1970) after‐tax version of the CAPM, studies of ex‐dividend date returns, and analyses linking tax rates and asset valuations. Recent work, such as that by Graham, Michaely, and Roberts (2003), Sialm (2005a), Hu and Tseng (2006), and Chetty, Rosenberg, and Saez (2007), to name just a few, has been concentrated in the last two strands.…”

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How Did the 2003 Dividend Tax Cut Affect Stock Prices?

Amromin

Harrison

Sharpe

2008

Financial Management

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"We test the hypothesis that the 2003 dividend tax cut boosted US stock prices and thereby lowered the cost of equity capital. Using an event-study methodology, we attempt to identify an aggregate stock market effect by comparing the behavior of US common stock prices with that of foreign equities and the equities of real estate investment trusts (REITs). We also examine the relative cross-sectional response of prices of high- and low-dividend-paying stocks. We do not find any imprint of the dividend tax cut news on the value of the aggregate US stock market. On the other hand, high-dividend stocks outperformed low-dividend stocks by a few percentage points over the event windows, suggesting that the tax cut may have induced asset reallocation within equity portfolios. Finally, the positive abnormal return on nondividend paying US stocks in 2003 does not appear to be tied to tax cut news." Copyright (c) 2008 Financial Management Association International..

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Who Wants to Trade Around Ex-dividend Days?

Cited by 4 publications

References 28 publications

Do Tax Law Changes Influence Ex‐Dividend Stock Price Behavior? Evidence from 1926 to 2005

Do Tax Law Changes Influence Ex‐Dividend Stock Price Behavior? Evidence from 1926 to 2005

Ex-dividend prices and investor trades: Evidence from Taiwan

How Did the 2003 Dividend Tax Cut Affect Stock Prices?

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