A re-examination of the behavior of common stocks on ex-dividend days.

Persistent Link:
http://hdl.handle.net/10150/185658
Title:
A re-examination of the behavior of common stocks on ex-dividend days.
Author:
Dougherty, Kevin Joseph.
Issue Date:
1991
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
Over the past thirty-six years most of the research on the ex-dividend day price behavior of common stocks has centered on either the tax-induced clientele hypothesis or the short-term trader hypothesis. However, neither theory has fully explained why, on average, the price drop-off on the ex-dividend day is less than the declared dividend. This paper investigates both of these hypotheses and introduces a new explanation. The tax-induced clientele hypothesis is considered by replicating the Elton and Gruber 1970 study and by examining the effects of the 1986 Tax Reform Act on ex-dividend day price movements during the years 1984 through 1988. The replication of the Elton and Gruber study in Chapter 2 will provide results contrary to the tax-induced clientele hypothesis. Also, the tax-induced clientele hypothesis cannot fully explain the price behavior of common stocks on ex-dividend days during the 1984 through 1988 period, as shown in Chapter 3. The short-term trader hypothesis is examined in Chapter 4 by determining if the actions of the short-term traders are truly riskless as proposed by Kalay (1982). If so, the price drop-off will be examined to see if these short-term traders are able to "arbitrage" the excess profits up to their marginal transaction costs. As with the tax-induced clientele hypothesis, the results will show that the short-term trader hypothesis cannot explain the ex-dividend day price movements of common stocks. A new explanation, a risk shift hypothesis, is considered in Chapter 5. This hypothesis proposes that the excess profits earned on the ex-dividend day are merely premiums for taking on more risk by holding securities during the ex-dividend day period. Unfortunately, the results do not support this theory.
Type:
text; Dissertation-Reproduction (electronic)
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Business Administration; Graduate College
Degree Grantor:
University of Arizona
Advisor:
Dyl, Edward A.

Full metadata record

DC FieldValue Language
dc.language.isoenen_US
dc.titleA re-examination of the behavior of common stocks on ex-dividend days.en_US
dc.creatorDougherty, Kevin Joseph.en_US
dc.contributor.authorDougherty, Kevin Joseph.en_US
dc.date.issued1991en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractOver the past thirty-six years most of the research on the ex-dividend day price behavior of common stocks has centered on either the tax-induced clientele hypothesis or the short-term trader hypothesis. However, neither theory has fully explained why, on average, the price drop-off on the ex-dividend day is less than the declared dividend. This paper investigates both of these hypotheses and introduces a new explanation. The tax-induced clientele hypothesis is considered by replicating the Elton and Gruber 1970 study and by examining the effects of the 1986 Tax Reform Act on ex-dividend day price movements during the years 1984 through 1988. The replication of the Elton and Gruber study in Chapter 2 will provide results contrary to the tax-induced clientele hypothesis. Also, the tax-induced clientele hypothesis cannot fully explain the price behavior of common stocks on ex-dividend days during the 1984 through 1988 period, as shown in Chapter 3. The short-term trader hypothesis is examined in Chapter 4 by determining if the actions of the short-term traders are truly riskless as proposed by Kalay (1982). If so, the price drop-off will be examined to see if these short-term traders are able to "arbitrage" the excess profits up to their marginal transaction costs. As with the tax-induced clientele hypothesis, the results will show that the short-term trader hypothesis cannot explain the ex-dividend day price movements of common stocks. A new explanation, a risk shift hypothesis, is considered in Chapter 5. This hypothesis proposes that the excess profits earned on the ex-dividend day are merely premiums for taking on more risk by holding securities during the ex-dividend day period. Unfortunately, the results do not support this theory.en_US
dc.typetexten_US
dc.typeDissertation-Reproduction (electronic)en_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineBusiness Administrationen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorDyl, Edward A.en_US
dc.contributor.committeememberAtkins, Allen B.en_US
dc.contributor.committeememberSternberg, Joel S.en_US
dc.identifier.proquest9208057en_US
All Items in UA Campus Repository are protected by copyright, with all rights reserved, unless otherwise indicated.