Dividend drop ratios and tax theory: An intraday analysis under different tax and price quoting regimes

Vyas Balasubramaniam, William Bertin, Thomas Henker, Laurie Prather

Research output: Contribution to conferencePaperResearchpeer-review

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Abstract

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.
Original languageEnglish
Pages1-26
Number of pages26
Publication statusPublished - 2010
EventFinancial Management Association European Conference - Hamburg, Germany
Duration: 10 Jun 201011 Jun 2010

Conference

ConferenceFinancial Management Association European Conference
Abbreviated title2010 FMA European Conference
CountryGermany
CityHamburg
Period10/06/1011/06/10

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Tax
Dividends
Taxation
Price changes
Payment
Ex-dividend

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Balasubramaniam, V., Bertin, W., Henker, T., & Prather, L. (2010). Dividend drop ratios and tax theory: An intraday analysis under different tax and price quoting regimes. 1-26. Paper presented at Financial Management Association European Conference, Hamburg, Germany.
Balasubramaniam, Vyas ; Bertin, William ; Henker, Thomas ; Prather, Laurie. / Dividend drop ratios and tax theory : An intraday analysis under different tax and price quoting regimes. Paper presented at Financial Management Association European Conference, Hamburg, Germany.26 p.
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Balasubramaniam, V, Bertin, W, Henker, T & Prather, L 2010, 'Dividend drop ratios and tax theory: An intraday analysis under different tax and price quoting regimes' Paper presented at Financial Management Association European Conference, Hamburg, Germany, 10/06/10 - 11/06/10, pp. 1-26.

Dividend drop ratios and tax theory : An intraday analysis under different tax and price quoting regimes. / Balasubramaniam, Vyas; Bertin, William; Henker, Thomas; Prather, Laurie.

2010. 1-26 Paper presented at Financial Management Association European Conference, Hamburg, Germany.

Research output: Contribution to conferencePaperResearchpeer-review

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AU - Prather, Laurie

N1 - © Copyright Vyas Balasubramaniam, William Bertin, Thomas Henker & Laurie Prather, 2010

PY - 2010

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N2 - 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.

AB - 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.

M3 - Paper

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Balasubramaniam V, Bertin W, Henker T, Prather L. Dividend drop ratios and tax theory: An intraday analysis under different tax and price quoting regimes. 2010. Paper presented at Financial Management Association European Conference, Hamburg, Germany.