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Presentation
Re-examining the dividend drop ratios with dividend capture trading
17th annual conference of the Multinational Finance Society (MFS) (2010)
  • Vyas Balasubramaniam
  • William Bertin, Bond University
  • Thomas Henker
  • Laurie Prather, Bond University
Abstract

We calculate dividend drop ratios over periods with changing quotation and taxation frameworks to assess the veracity of competing explanations. We use intraday prices, adjusted for non-trading, to 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 we find that stocks trading ex-dividend, on average, underperform the market by a large amount over the following month. We attribute this phenomenon to dividend capture trading by tax advantaged and tax indifferent market participants.

Keywords
  • dividend,
  • drop ratios,
  • capture trading
Publication Date
June 17, 2010
Comments
Interim status: Citation only.

Balasubramanian, V., Bertin, W., Henker, T., & Prather, L. (2010). Re-examining the dividend drop ratios with dividend capture trading. Paper presented at the 17th annual conference of the Multinational Finance Society (MFS), Barcelona, Spain.

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© Copyright Vyas Balasubramaniam, William Bertin, Thomas Henker & Laurie Prather, 2010.
Citation Information
Vyas Balasubramaniam, William Bertin, Thomas Henker and Laurie Prather. "Re-examining the dividend drop ratios with dividend capture trading" 17th annual conference of the Multinational Finance Society (MFS) (2010)
Available at: http://works.bepress.com/laurie_prather/15/