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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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3421.

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Date of creation: Aug 1990
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Publication status: published as Journal of the Japanese and International Economies, 4(3): 401-427, December 1990.
Handle: RePEc:nbr:nberwo:3421

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  1. Grinblatt, Mark S. & Masulis, Ronald W. & Titman, Sheridan, 1984. "The valuation effects of stock splits and stock dividends," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(4), pages 461-490, December.
  2. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
  3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  4. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  5. Heath, David C & Jarrow, Robert A, 1988. "Ex-dividend Stock Price Behavior and Arbitrage Opportunities," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 61(1), pages 95-108, January.
  6. Poterba, James M & Summers, Lawrence H, 1984. " New Evidence that Taxes Affect the Valuation of Dividends," Journal of Finance, American Finance Association, American Finance Association, vol. 39(5), pages 1397-1415, December.
  7. Lakonishok, Josef & Vermaelen, Theo, 1986. "Tax-induced trading around ex-dividend days," Journal of Financial Economics, Elsevier, Elsevier, vol. 16(3), pages 287-319, July.
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Cited by:
  1. Frank, Murray & Jagannathan, Ravi, 1998. "Why do stock prices drop by less than the value of the dividend? Evidence from a country without taxes," Journal of Financial Economics, Elsevier, Elsevier, vol. 47(2), pages 161-188, February.
  2. Green, Richard C. & Rydqvist, Kristian, 1999. "Ex-day behavior with dividend preference and limitations to short-term arbitrage: the case of Swedish lottery bonds," Journal of Financial Economics, Elsevier, Elsevier, vol. 53(2), pages 145-187, August.
  3. John H. Boyd & Ravi Jagannathan, 1994. "Ex-dividend price behavior of common stocks," Working Papers, Federal Reserve Bank of Minneapolis 500, Federal Reserve Bank of Minneapolis.
  4. Liljeblom, Eva & Loflund, Anders & Hedvall, Kaj, 2001. "Foreign and domestic investors and tax induced ex-dividend day trading," Journal of Banking & Finance, Elsevier, Elsevier, vol. 25(9), pages 1687-1716, September.
  5. Jakob, Keith & Ma, Tongshu, 2004. "Tick size, NYSE rule 118, and ex-dividend day stock price behavior," Journal of Financial Economics, Elsevier, Elsevier, vol. 72(3), pages 605-625, June.

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