Investigation of the Costly-Arbitrage Model of Price Formation Around the Ex-Dividend Day
AbstractWe estimate the costly-arbitrage model of Boyd and Jagannathan (1994) using Norwegian stock market data. Taxable distributions take place at two separate dates, one that entails the distribution of an imputation-tax credit and another the distribution of the cash dividend. We find that the costly-arbitrage model is consistent with observed stock returns around the ex-dividend day, but the model cannot explain the return patterns around the distribution of the tax credit. We relate the difference in price formation to uncertainty.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6074.
Date of creation: Feb 2007
Date of revision:
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Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-24 (All new papers)
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