Finance and Financial Management Commons^™

Complexity Of Information And Trading Behavior: The Case Of Dividend Increase Announcements, Ali M. Fatemi, Sanjay Deshmukh, Iraj Fooladi

Ali M Fatemi

We examine the intraday trading response of participants in the common stock market and in the preferred stock market to announcements of dividend increases on common stock. We find that participants in the preferred stock market respond more slowly to the announcement than those in the common stock market. Our results are consistent with the implications of Heiner’s model of behavior under uncertainty, which suggest that investors who face a more complicated environment respond more slowly to new information. Participants in the preferred stock market face a more complicated environment because they have to determine the source of financing of …