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| Author | : Roni Michaely |
| Publisher | : |
| Total Pages | : 68 |
| Release | : 1992 |
| Genre | : Stocks |
| ISBN | : |
| Author | : Roni Michaely |
| Publisher | : |
| Total Pages | : |
| Release | : 2000 |
| Genre | : |
| ISBN | : |
To investigate the effect of taxation on stock price and trading volume around the ex-dividend day, we use the Italian stock market, where dividends on two classes of stock are taxed differently. When all investors face identical tax rates on dividends (holders of savings stocks), we find that the average price decline between the cum-and the ex-dividend day equals the after-tax valuation of dividends, and that there is no excess volume around the ex-day. When the tax rate on dividend income varies across investors (the common stock sample), we find significant excess volume around the ex-dividend day, as well as an average price decline smaller than the minimum after-tax valuation of dividends. The latter finding is inconsistent with the pure tax-trading hypothesis. It may be explained by the confounding registration effect: individual investors sell the stock prior to the ex-day to maintain their fiscal anonymity. However, a study of block trading activity, which is done by traders who are not subject to the registration effect, shows evidence consistent with the notion that a significant portion of the ex-dividend day trading is motivated by the differential valuation of dividends relative to capital gains. We also show that higher transaction costs result in higher ex-dividend day excess returns and lower abnormal volume. This finding is consistent with quot;profit eliminationquot; activity by institutions and corporations.
| Author | : Roni Michaely |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 1994 |
| Genre | : Securities |
| ISBN | : |
| Author | : Jerry Green |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 1980 |
| Genre | : Bonds |
| ISBN | : |
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 | : Roni Michaely |
| Publisher | : Forgotten Books |
| Total Pages | : 44 |
| Release | : 2018-01-29 |
| Genre | : Business & Economics |
| ISBN | : 9780267099344 |
Excerpt from Investors' Heterogeneity, Prices, and Volume Around the Ex-Dividend Day Our analysis shows that unless a perfect tax clientele exists, it is not possible to infer tax rates from price alone. [by a perfect tax clientele we mean that each tax group hold different securities, and all trading is intra-group trading. See Miller and Modigliani (1961) and Elton and Gruber However, the cross-sectional distribution of tax rates can be inferred by using both price and volume data. This point can be illustrated using the following stylized example. Assume that there are three groups of traders in the marketplace with a marginal rate of substitution between dividends and capital gains income of and respectively. Assume further that the average price drop relative to the dividend amount is Using the standard analysis, we may conclude that the second group dominates the ex-dividend day price determination. However. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
| Author | : Yi Zhang |
| Publisher | : |
| Total Pages | : |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
We examine the impact of the 2003 dividend tax cut, which removes the differential taxation between dividends and capital gains for individual investors, on the ex-dividend day price and trading volume. We find the ex-dividend day price and volume are affected by taxes, risk, and transaction costs. The ex-dividend day price drop ratio (excess return) increases (decreases) and dividend clienteles weaken after the tax cut. Ex-dividend day abnormal volume among high dividend yield stocks decreases after the tax cut consistent with a diminished motivation for tax-induced trading. Our results suggest that individual investors have a measurable effect on the ex-dividend day price and trading volume.
| Author | : Roni Michaely |
| Publisher | : |
| Total Pages | : |
| Release | : 2000 |
| Genre | : |
| ISBN | : |
This paper analyzes the relationship between tax heterogeneity and the behavior of stock prices and trading volume around the ex-dividend day within an equilibrium framework. We conclude that, even in a world without transaction costs, the price drop on the ex-day need not be equal to the dividend amount. Our model accounts for the higher market trading volume around the ex-day, and shows this to be a function of tax heterogeneity among traders. We show that the volume of trade around the ex-day contains information about investors' tax preferences above and beyond the information contained in the ex-day price alone. Consistent with the model's predictions, our empirical analysis reveals that as the risk associated with the ex-dividend day increases, or tax heterogeneity decreases, trading volume decreases.
| Author | : Khamis Al-Yahyaee |
| Publisher | : |
| Total Pages | : |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
We examine the ex-dividend day behaviour in a unique setting where (1) there are neither taxes on dividends nor on capital gains, (2) stock prices have been decimalized, (3) dividends are distributed annually, and (4) we have data that enable us to examine bid-ask bounce effects. In this economy, any price decline that is smaller than the dividends can not be attributed to taxes and price discreteness. Like previous studies, we find that the stock price drops by less than the amount of dividends and there is a significant positive ex-day return. By examining abnormal volumes around the ex-dividend day, we find no evidence of short-term trading. We are able to account for our results using market microstructure models. When the impact of market microstructure is taken into account, the ex-dividend drop is not significantly different to the value of the dividend paid.
| Author | : Priit Sander |
| Publisher | : |
| Total Pages | : 39 |
| Release | : 2007 |
| Genre | : Finance |
| ISBN | : 9789949117130 |
| Author | : C. Bryan Cloyd |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
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.
