This article investigates the importance of risk exposure and the effects of the 1984 Tax Reform Act on the ex-dividend day behavior. The tax reform appears to have inhibited short-term trading activities by increasing the risk exposure of incorporated traders. Moreover, stocks for which existing listed options permitted the reduction of risk through hedged dividend-stripping strategies were affected much less from the new tax code than their nonoptionable counterparts. This implies that risk affects investors' dividend yield choice and that the ex-dividend day behavior may be caused, in part, by the existence of risk premia. Copyright 1989 by the University of Chicago.
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Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 62 (1989) Issue (Month): 2 (April) Pages: 157-73 Download reference. The following formats are available: HTML
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