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The Effects Of The Announcements Of Dividend Increases On Stock Return Volatility: The Evidence From The Options Market

Author

Listed:
  • Narayanan Jayaraman
  • Kuldeep Shastri

Abstract

This paper examines the impact of the announcements of dividend increases on the volatility of underlying stock returns implied by option prices, and analyses whether the impact is related to the label associated with the dividend increase. The results suggest that the announcements of labelled dividend increases are accompanied by a decrease in implied volatility, while the announcements of unlabelled increases in dividends are associated with no change in implied volatility. These results are consistent with the hypothesis that signal implicit in the announcements of dividend increases provides noisy information about the firm's volatility.

Suggested Citation

  • Narayanan Jayaraman & Kuldeep Shastri, 1993. "The Effects Of The Announcements Of Dividend Increases On Stock Return Volatility: The Evidence From The Options Market," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 20(5), pages 673-685, September.
    • Handle: RePEc:bla:jbfnac:v:20:y:1993:i:5:p:673-685
    DOI: 10.1111/j.1468-5957.1993.tb00283.x
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    References listed on IDEAS

    as
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