Year: 1994
Type: article
Abstract: This study examines common stock prices around ex-dividend dates. Such price data usually contain a mixture of observations—some with and some without arbitrageurs and/or dividend capturers active. Our theory predicts that such mixing will result in a nonlinear relation between percentage price drop and dividend yield—not the commonly assumed linear relation. This prediction and another important prediction of theory are supported empirically. In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop has been an excellent (average) rule of thumb.
Source: Review of Financial Studies
DOI: 10.1093/rfs/7.4.711
Authors: John H. Boyd, Ravi Jagannathan
Institutions: University of Minnesota, Federal Reserve Bank of Minneapolis
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2095354744