Open Access. Powered by Scholars. Published by Universities.®
Finance and Financial Management Commons™
Open Access. Powered by Scholars. Published by Universities.®
- Discipline
Articles 1 - 2 of 2
Full-Text Articles in Finance and Financial Management
Re-Examining The Dividend Drop Ratios With Dividend Capture Trading, Vyas Balasubramaniam, William Bertin, Thomas Henker, Laurie Prather
Re-Examining The Dividend Drop Ratios With Dividend Capture Trading, Vyas Balasubramaniam, William Bertin, Thomas Henker, Laurie Prather
Laurie Prather
We calculate dividend drop ratios over periods with changing quotation and taxation frameworks to assess the veracity of competing explanations. We use intraday prices, adjusted for non-trading, to provide a more accurate picture of price changes due to dividend payments than those produced in previous literature. Intraday estimates for dividend drop ratios are consistently higher than those calculated with end of day prices. Further we find that stocks trading ex-dividend, on average, underperform the market by a large amount over the following month. We attribute this phenomenon to dividend capture trading by tax advantaged and tax indifferent market participants.
Dividend Drop Ratios And Tax Theory: An Intraday Analysis Under Different Tax And Price Quoting Regimes, Vyas Balasubramaniam, William Bertin, Thomas Henker, Laurie Prather
Dividend Drop Ratios And Tax Theory: An Intraday Analysis Under Different Tax And Price Quoting Regimes, Vyas Balasubramaniam, William Bertin, Thomas Henker, Laurie Prather
Laurie Prather
We calculate dividend drop ratios over periods with changing quotation and taxation frameworks to assess the validity of competing explanations. Using intraday prices adjusted for non-trading, we provide a more accurate picture of price changes due to dividend payments than those produced in previous literature. Intraday estimates for dividend drop ratios are consistently higher than those calculated with end of day prices. Further findings indicate that stocks trading ex-dividend, on average, underperform the market over the following month. We attribute this phenomenon to dividend capture trading by tax advantaged and tax indifferent market participants.