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Ex-day behavior of Japanese stock prices: new insights from new methodology

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  • Fumio Hayashi
  • Ravi Jagannathan

Abstract

We study the ex-dividend day behavior of Japanese stock prices for the period 1983–87. We find that, contrary to previous findings, prices of ex-day stocks drop by nearly the full amount of the dividend. However, ex-day stocks shows an abnormal return. Also, for the many ex-dividend day stocks that also go ex-rights on the same ex-day, we find that the return is on average higher than that for stocks without rights issues. We thus conclude that the ex-day behavior of Japanese stocks are qualitatively similar to that of U.S. stocks.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Discussion Paper / Institute for Empirical Macroeconomics with number 30.

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Date of creation: 1990
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Handle: RePEc:fip:fedmem:30

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Keywords: Stock - Prices - Japan ; Japan;

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References

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  1. Heath, David C & Jarrow, Robert A, 1988. "Ex-dividend Stock Price Behavior and Arbitrage Opportunities," The Journal of Business, University of Chicago Press, vol. 61(1), pages 95-108, January.
  2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  3. Grinblatt, Mark S. & Masulis, Ronald W. & Titman, Sheridan, 1984. "The valuation effects of stock splits and stock dividends," Journal of Financial Economics, Elsevier, vol. 13(4), pages 461-490, December.
  4. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-98, December.
  5. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  6. Poterba, James M & Summers, Lawrence H, 1984. " New Evidence that Taxes Affect the Valuation of Dividends," Journal of Finance, American Finance Association, vol. 39(5), pages 1397-1415, December.
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Cited by:
  1. Liljeblom, Eva & Loflund, Anders & Hedvall, Kaj, 2001. "Foreign and domestic investors and tax induced ex-dividend day trading," Journal of Banking & Finance, Elsevier, vol. 25(9), pages 1687-1716, September.
  2. John H. Boyd & Ravi Jagannathan, 1994. "Ex-dividend price behavior of common stocks," Working Papers 500, Federal Reserve Bank of Minneapolis.
  3. Murray Frank & Ravi Jagannathan, 1997. "Why do stock prices drop by less than the value of the dividend? Evidence from a country without taxes," Staff Report 229, Federal Reserve Bank of Minneapolis.

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