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Risk Shift Following Dividend Change Announcement: The Role of Trading Volume

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  • Kim, Sangphill
  • Rui, Oliver M
  • Xu, Peter

Abstract

This study investigates the role of the trading volume in explaining the shift of firm's total and systematic risk when a dividend change is announced. We compared the differential interpretation hypothesis and pre-announcement disagreement hypothesis with more than 20,000 samples collected for 30 years. We found that the total risk generally increases regardless of the level of abnormal trading volume, which supports the differential interpretation hypothesis. We also found a positive relationship between announcement-period abnormal trading volume and post-announcement changes in beta, which is only consistent with the differential interpretation hypothesis. However, the decrease in beta for the majority of sample firms is only consistent with the pre-announcement disagreement hypothesis. Copyright 2002 by Kluwer Academic Publishers

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  • Kim, Sangphill & Rui, Oliver M & Xu, Peter, 2002. "Risk Shift Following Dividend Change Announcement: The Role of Trading Volume," Review of Quantitative Finance and Accounting, Springer, vol. 19(1), pages 45-63, July.
    • Handle: RePEc:kap:rqfnac:v:19:y:2002:i:1:p:45-63
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    Cited by:

    1. Jeffrey Jones & Jenny Gu & Pu Liu, 2014. "Do dividend initiations signal a reduction in risk? Evidence from the option market," Review of Quantitative Finance and Accounting, Springer, vol. 42(1), pages 143-158, January.
    2. Ishmael Radikoko & Emmanuel Ndjadingwe, 2015. "Investigating the Effects of Dividends Pay-out on Stock Prices and Traded Equity Volumes of BSE Listed Firms," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 1(4), pages 24-37, October.
    3. Andrey Kudryavtsev, 2017. "The Effect of Stock Return Sequences on Trading Volumes," IJFS, MDPI, vol. 5(4), pages 1-15, October.
    4. Tomislav Globan & Tihana Skrinjaric, 2020. "Penny wise and pound foolish: capital gains tax and trading volume on the Zagreb Stock Exchange," Public Sector Economics, Institute of Public Finance, vol. 44(3), pages 299-329.

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