Decimalization And The Ex Dividend Behavior Of Stock Prices PDF Download
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| Author | : Dan W. French |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
Download Decimalization and the Ex-Dividend Behavior of Stock Prices Book in PDF, ePub and Kindle
In this paper, we examine changes in the behavior of ex-dividend stock prices when the exchanges changed from pricing stocks in discrete intervals to decimal pricing. Based on prior models of ex-dividend behavior and price discreteness of Dubofsky and of Bali and Hite, we anticipate that the move to trading in decimals would decrease the variance of returns on all exchanges and increase the level of ex-dividend-day returns on the NYSE while reducing them on the Amex and Nasdaq.Our sample of ex-dividend-day returns covers periods slightly longer than one year before and after decimalization. For the overall sample and for each of the individual exchanges (Amex, Nasdaq and NYSE), the variances of ex-dividend returns experience a significant decrease after decimalization while the mean returns increase by a positive and significant amount. To account for the increase in ex-day returns on the Amex and Nasdaq, we develop an alternative model to explain the effect of discreteness on ex-day returns. Tests of the three models (Dubofsky's, Bali and Hite's, and ours) indicate that prior to decimalization, as expected, Dubofsky's model is better for explaining NYSE ex-day returns and ours fits the Nasdaq better. Bali and Hite's model, however, is unable to explain any of the pre-decimalization ex-day returns, including those of the Nasdaq where the Bali-Hite model might provide a reasonable description of ex-day market behavior. After decimalization, ex-dividend-day returns do not appear to follow either the scenario described by Dubofsky or by us. The most likely cause of this is that traders in the market are placing ex-dividend-day orders with limits somewhere between prices indicated by Dubofsky and by us.We also provide evidence that ex-dividend returns attributable to factors other than discreteness and the dividend yield actually declined following decimalization. Since the most obvious factor is transactions costs, we interpret this to be evidence of a reduction in ex-day returns caused by a reduction in transactions costs. We also find that the dividend yield is a significant influence on ex-dividend-day returns.
| Author | : John R. Graham |
| Publisher | : |
| Total Pages | : 45 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Download Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex-Dividend Pricing Before and after Decimalization Book in PDF, ePub and Kindle
By the end of January 2001, all NYSE stocks had converted their price quotations from 1/8ths and 1/16ths to decimals. This study examines the effect of this change in price quotations on ex-dividend day activity. We find that abnormal ex-dividend day returns increase in the 1/16th and decimal pricing eras, relative to the 1/8thera, which is inconsistent with microstructure explanations of the ex-day price movements. We also find that abnormal returns increase in conjunction with a May 1997 reduction in the capital gains tax rate, as they should if relative taxation of dividends and capital gains affects ex-day pricing.
| Author | : Jerry Green |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 1980 |
| Genre | : Bonds |
| ISBN | : |
Download Taxation and the Ex-dividend Day Behavior of Common Stock Prices Book in PDF, ePub and Kindle
The behavior of stock prices around ex-dividend days has been suggested as evidence for tax-induced clientele effects and as a means to estimate the average effective tax rate faced by investors. In this paper these possibilities are examined theoretically and empirically. Theoretically it is shown that the measured price drop per dollar of dividend may provide a biased estimate of the effective tax rate. Looking at the volume of trade around ex-dividend days we show that the conditions under which it would be unbiased are unlikely to hold. Strong evidence, based on a broader database than that used by previous investigators, is presented for the presence of the clientele effect
| Author | : Richard J. Hillman (au) |
| Publisher | : DIANE Publishing |
| Total Pages | : 122 |
| Release | : 2005-11 |
| Genre | : |
| ISBN | : 9781422302361 |
Download Securities Markets Book in PDF, ePub and Kindle
In early 2001, U.S. stock & option markets began quoting prices in decimal increments rather than fractions of a dollar. At the same time, the minimum price increment, or tick size, was reduced to a penny on the stock markets & to 10¢ & 5¢ on the option markets. Although many believe that decimal pricing has benefited small individual (retail) investors, concerns have been raised that the smaller tick sizes have made trading more challenging & costly for large institutional investors, including mutual funds & pension plans. The financial livelihood of market intermediaries may also have been negatively affected by the lower ticks. This report assesses the effect of decimal pricing on retail & institutional investors & on market intermediaries. Charts.
| Author | : C. Bryan Cloyd |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
Download Ticks and Tax Book in PDF, ePub and Kindle
We examine ex-dividend day stock price behavior before and after the NYSE converted from discrete (1/16ths) to decimal pricing systems in early 2001, as well as the effect of equalizing the federal income tax rates on dividend and long-term capital gain income in May 2003. Prior literature reports a robust empirical result that share prices decrease on the ex-dividend day by less than the amount of the dividend, but there is little agreement about whether this incomplete price adjustment is caused by share price discreteness, differential taxation of dividend income relative to capital gains, or other factors. Two recent studies, Graham, Michaely and Roberts (2003) and Jakob and Ma (2004), report that declining price discreteness (e.g. from 1/16ths to decimal pricing) had no material effect on the cum- to ex-day price-drop-to-dividend ratio. Although we report similar findings for the price-drop ratio, we find that ex-day abnormal returns declined significantly as a result of decimalization in 2001, and declined further in response to tax rate equalization in May 2003. Thus, our findings support the view that both price discreteness and differential taxation affect ex-dividend day stock price behavior.
| Author | : C Justin Robinson |
| Publisher | : |
| Total Pages | : 22 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Insights Into the Ex-Dividend Behavior of Stock Prices Book in PDF, ePub and Kindle
This paper adds to the literature on the behavior of stock prices around the ex-dividend date by providing evidence on the behavior of stock returns and trading volumes around the ex-dividend date in the unique environment of the Jamaica Stock Exchange. The Jamaica Stock Exchange is characterized by two major changes to the dividend tax rate in recent years and the absence of any capital gains tax, short selling or market makers. Using the event-study methodology, the paper finds that changes in the dividend tax rate produces major changes in the price drop ratio and abnormal returns in one instance but not in the other, while trading volumes increase around the ex-dividend date regardless of the tax regime. These results suggest that while tax differentials between capital gains and dividends can play a major role in the ex-dividend behavior of stock prices, it may not provide a complete explanation of such.
| Author | : |
| Publisher | : |
| Total Pages | : 31 |
| Release | : 1985 |
| Genre | : |
| ISBN | : |
Download The Ex-dividend Behavior of Stock Prices on the Stockholm Stock Exchange Book in PDF, ePub and Kindle
| Author | : Paul B. Readett |
| Publisher | : |
| Total Pages | : 104 |
| Release | : 1956 |
| Genre | : |
| ISBN | : |
Download The Price Behavior of Stocks on Their Ex-dividend Dates Book in PDF, ePub and Kindle
| Author | : Keith Jakob |
| Publisher | : |
| Total Pages | : |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
Download Tick Size, NYSE Rule 118, and Ex-Dividend Day Stock Price Behavior Book in PDF, ePub and Kindle
Bali and Hite (1998) and Dubofsky (1992) propose models in which market microstructure effects play a role in the ex-dividend day price drop anomaly. Bali and Hite suggest that the anomaly is caused solely by price discreteness, while Dubofsky suggests that NYSE Rule 118 is also involved. We test these models by examining cum- to ex-day price drops during the one-eighth, one-sixteenth, and decimal tick size regimes. While the evidence is qualitatively consistent with Dubofsky's predictions, neither model is satisfactory in a quantitative sense. One of our main empirical findings is that no significant decline was evident in the magnitude of the ex-day anomaly after the tick size reduction.
| Author | : Cheng F. Lee |
| Publisher | : Center for PBBEFR & Ainosco Press |
| Total Pages | : |
| Release | : 2018-01-01 |
| Genre | : Business & Economics |
| ISBN | : 9866286738 |
Download Advances in Quantitative Analysis of Finance and Accounting (New Series) Vol．16 Book in PDF, ePub and Kindle
Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.
