Re-examining the dividend drop ratios with dividend capture trading

Vyas Balasubramaniam, William Bertin, Thomas Henker, Laurie Prather

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-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 languageEnglish
Title of host publicationProceedings of the seventeenth annual conference of the multinational finance society
EditorsX. Freixas, T. Malliaris, P. Theodossiou
PublisherMultinational Finance Society
Pages1-24
Number of pages24
ISBN (Print)1545-6323
Publication statusPublished - 2010
EventAnnual Conference of the Multinational Finance Society - Barcelona, Spain
Duration: 27 Jun 201030 Jun 2010
Conference number: 17th
http://www.mfsociety.org/page.php?pageID=116

Conference

ConferenceAnnual Conference of the Multinational Finance Society
Abbreviated titleMFS
CountrySpain
CityBarcelona
Period27/06/1030/06/10
Internet address

Fingerprint

Dividends
Tax
Taxation
Price changes
Payment
Ex-dividend

Cite this

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 (pp. 1-24). Multinational Finance Society.
Balasubramaniam, Vyas ; Bertin, William ; Henker, Thomas ; Prather, Laurie. / Re-examining the dividend drop ratios with dividend capture trading. Proceedings of the seventeenth annual conference of the multinational finance society. editor / X. Freixas ; T. Malliaris ; P. Theodossiou. Multinational Finance Society, 2010. pp. 1-24
@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",

}

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; Prather, Laurie.

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 proceedingConference contributionResearchpeer-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

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

ER -

Balasubramaniam V, Bertin W, Henker T, Prather L. Re-examining the dividend drop ratios with dividend capture trading. In Freixas X, Malliaris T, Theodossiou P, editors, Proceedings of the seventeenth annual conference of the multinational finance society. Multinational Finance Society. 2010. p. 1-24