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The dividend month premium

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  • Hartzmark, Samuel M.
  • Solomon, David H.
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    Abstract

    We find an asset pricing anomaly whereby companies have positive abnormal returns in months when they are predicted to issue a dividend. Abnormal returns in predicted dividend months are high relative to other companies and relative to dividend-paying companies in months without a predicted dividend, making risk-based explanations unlikely. The anomaly is as large as the value premium, but less volatile. The premium is consistent with price pressure from dividend-seeking investors. Measures of liquidity and demand for dividends are associated with larger price increases in the period before the ex-day (when there is no news about the dividend) and larger reversals afterward.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 109 (2013)
    Issue (Month): 3 ()
    Pages: 640-660

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    Handle: RePEc:eee:jfinec:v:109:y:2013:i:3:p:640-660

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Mispricing; Dividends; Behavioral finance; Price pressure;

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    Cited by:
    1. Chen, Zhijuan & Lin, William T. & Ma, Changfeng & Tsai, Shih-Chuan, 2014. "Liquidity provisions by individual investor trading prior to dividend announcements: Evidence from Taiwan," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 358-374.

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