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The Role Of Dividends In Equity Markets: Evidence From Sectoral-Level Analysis

Author

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  • Doh-Khul Kim
  • Najrin Khanom

Abstract

The purpose of this research is to identify how dividend payments affect the U.S. equity market at the sectoral level. A conventional stock valuation model predicts a positive response of equity price to higher dividend payment. Higher dividends convey confidence about the firm’s future to the general investors, which is supported by the signaling hypothesis. Using representative exchange traded funds for 11 sectors in the U.S. along with traditional OLS and panel regression analysis, this paper shows that the stock valuation model is generally confirmed. Eight sectors show positive impacts of dividends with statistical significance found in three sectors; Consumer Staples, Utilities, and Real Estate

Suggested Citation

  • Doh-Khul Kim & Najrin Khanom, 2020. "The Role Of Dividends In Equity Markets: Evidence From Sectoral-Level Analysis," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 14(1), pages 23-34.
    • Handle: RePEc:ibf:ijbfre:v:14:y:2020:i:1:p:23-34
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    More about this item

    Keywords

    Dividend Payment; Sectoral-level ETF; Equity Market Response;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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