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Seasonality in ex dividend day returns

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Author Info
Rakesh Bali
Abstract

It is documented that for both high- and low-yield stocks, ex day raw returns are systematically higher in January than for the other months of the year. Although such patterns are not predicted by any known tax-clienteles model, they are consistent with the price discreteness and spread models in the spirit of Bali and Hite ( Journal of Financial Economics , 47 , 127-59, 1998) and Bali ( Journal of Economics and Finance , 27 , 190-210, 2003). For high-yield stocks in January, the returns are about one-fourth those for low-yield stocks, and for the remaining months they are significantly negative. The rents that arbitrageurs earn for supplying liquidity are higher for low-yield stocks and are significantly higher in January.

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Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

Volume (Year): 10 (2003)
Issue (Month): 14 (November)
Pages: 929-932
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Handle: RePEc:taf:apeclt:v:10:y:2003:i:14:p:929-932

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  1. Elton, Edwin J & Gruber, Martin J, 1970. "Marginal Stockholder Tax Rates and the Clientele Effect," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 68-74, February. [Downloadable!] (restricted)
  2. Brooks, LeRoy D & Edwards, Charles E, 1980. "Marginal Stockholders and Implied Tax Rates," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 616-19, November. [Downloadable!] (restricted)
  3. Ligon, James A, 1997. "A Simultaneous Test of Competing Theories Regarding the January Effect," Journal of Financial Research, Southern Finance Association and Southwestern Finance Association, vol. 20(1), pages 13-32, Spring.
  4. Ritter, Jay R, 1988. " The Buying and Selling Behavior of Individual Investors at the Turn of the Year," Journal of Finance, American Finance Association, vol. 43(3), pages 701-17, July. [Downloadable!] (restricted)
  5. Eades, Kenneth M & Hess, Patrick J & Kim, E Han, 1994. " Time-Series Variation in Dividend Pricing," Journal of Finance, American Finance Association, vol. 49(5), pages 1617-38, December. [Downloadable!] (restricted)
  6. Sarig, Oded & Tolkowsky, Efrat, 1997. "Dividend effects in Israel: a puzzle," Economics Letters, Elsevier, vol. 54(2), pages 169-174, February. [Downloadable!] (restricted)
  7. Keim, Donald B., 1983. "Size-related anomalies and stock return seasonality : Further empirical evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 13-32, June. [Downloadable!] (restricted)
  8. Bali, Rakesh & Hite, Gailen L., 1998. "Ex dividend day stock price behavior: discreteness or tax-induced clienteles?," Journal of Financial Economics, Elsevier, vol. 47(2), pages 127-159, February. [Downloadable!] (restricted)
  9. Rozeff, Michael S. & Kinney, William Jr., 1976. "Capital market seasonality: The case of stock returns," Journal of Financial Economics, Elsevier, vol. 3(4), pages 379-402, October. [Downloadable!] (restricted)
  10. Miller, Merton H & Scholes, Myron S, 1982. "Dividends and Taxes: Some Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1118-41, December. [Downloadable!] (restricted)
  11. Rakesh Bali, 2003. "Variation in ex day dividend pricing: Myth or reality?," Journal of Economics and Finance, Springer, vol. 27(2), pages 190-210, June. [Downloadable!] (restricted)
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