Testing for Multiple Types of Marginal Investor in Ex-day Pricing
AbstractThe observed changes in share prices at the ex-dividend day have led researchers to look for a single marginal investor type, either a long or a short term trader, to explain the particular patterns in returns in different markets - dominating equilibrium. This paper provides a model which extends this research in three directions. One, it allows for the possibility that different types of traders may influence different stocks thereby generating a separating equilibrium. Two, it identifies an additional marginal investor who has the option of being taxed as a short term or long term trader. Three, it explicitly models the fact that it can take can be a considerable time lag from the time a dividend based trade is made until taxes have to be paid on that trade. A unique data set from New Zealand is used for the empirical analysis. Evidence of a separating equilibrium with at least two types of marginal investors is found
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Bibliographic InfoPaper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 02-12.
Length: 35 pages
Date of creation: 02 Jun 2002
Date of revision:
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Postal: The Aarhus School of Business, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
Fax: + 45 86 15 19 43
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Dividends; taxes; ex-day pricing;
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- Dai, Qinglei & Rydqvist, Kristian, 2009. "Investigation of the costly-arbitrage model of price formation around the ex-dividend day in Norway," Journal of Empirical Finance, Elsevier, vol. 16(4), pages 582-596, September.
- Maria Rosa Borges, 2007. "An Arbitrage Model for the Stock Price Adjustment in the Dividend Period," Working Papers Department of Economics 2007/09, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Dai, Qinglei & Rydqvist, Kristian, 2007. "Investigation of the Costly-Arbitrage Model of Price Formation Around the Ex-Dividend Day," CEPR Discussion Papers 6074, C.E.P.R. Discussion Papers.
- Maria Borges, 2008. "The Ex-Dividend Day Stock Price Behavior: The Case of Portugal," Atlantic Economic Journal, International Atlantic Economic Society, vol. 36(1), pages 15-30, March.
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