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

Bond Business School

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › Research › peer-review

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 language	English
Title of host publication	Proceedings of the seventeenth annual conference of the multinational finance society
Editors	X. Freixas, T. Malliaris, P. Theodossiou
Publisher	Multinational Finance Society
Pages	1-24
Number of pages	24
ISBN (Print)	1545-6323
Publication status	Published - 2010
Event	Annual Conference of the Multinational Finance Society - Barcelona, Spain Duration: 27 Jun 2010 → 30 Jun 2010 Conference number: 17th http://www.mfsociety.org/page.php?pageID=116

Conference

Conference	Annual Conference of the Multinational Finance Society
Abbreviated title	MFS
Country/Territory	Spain
City	Barcelona
Period	27/06/10 → 30/06/10
Internet address	http://www.mfsociety.org/page.php?pageID=116

Cite this

@inproceedings{d5a82e659686467da62d52c5e7cb59e3,

title = "Re-examining the dividend drop ratios with dividend capture trading",

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.",

author = "Vyas Balasubramaniam and William Bertin and Thomas Henker and Laurie Prather",

year = "2010",

language = "English",

isbn = "1545-6323",

pages = "1--24",

editor = "X. Freixas and T. Malliaris and P. Theodossiou",

booktitle = "Proceedings of the seventeenth annual conference of the multinational finance society",

publisher = "Multinational Finance Society",

note = "Annual Conference of the Multinational Finance Society, MFS ; Conference date: 27-06-2010 Through 30-06-2010",

url = "http://www.mfsociety.org/page.php?pageID=116",

}

Balasubramaniam, V, Bertin, W, Henker, T & Prather, L 2010, Re-examining the dividend drop ratios with dividend capture trading. in X Freixas, T Malliaris & P Theodossiou (eds), Proceedings of the seventeenth annual conference of the multinational finance society. Multinational Finance Society, pp. 1-24, Annual Conference of the Multinational Finance Society, Barcelona, Spain, 27/06/10.

Re-examining the dividend drop ratios with dividend capture trading. / Balasubramaniam, Vyas; Bertin, William; Henker, Thomas et al.
Proceedings of the seventeenth annual conference of the multinational finance society. ed. / X. Freixas; T. Malliaris; P. Theodossiou. Multinational Finance Society, 2010. p. 1-24.

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › Research › peer-review

TY - GEN

T1 - Re-examining the dividend drop ratios with dividend capture trading

AU - Balasubramaniam, Vyas

AU - Bertin, William

AU - Henker, Thomas

AU - Prather, Laurie

N1 - Conference code: 17th

PY - 2010

Y1 - 2010

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 - Conference contribution

SN - 1545-6323

SP - 1

EP - 24

BT - Proceedings of the seventeenth annual conference of the multinational finance society

A2 - Freixas, X.

A2 - Malliaris, T.

A2 - Theodossiou, P.

PB - Multinational Finance Society

T2 - Annual Conference of the Multinational Finance Society

Y2 - 27 June 2010 through 30 June 2010

ER -

Re-examining the dividend drop ratios with dividend capture trading

Abstract

Conference

Fingerprint

Cite this