The Ex-Dividend Day Stock Price Behavior: The Case of Portugal
This paper examines the ex-dividend day behavior of stock prices in the Lisbon Stock Market over the period 1990–1998, extending on international evidence and discussing the adequacy of competing theories, considering the Portuguese institutional environment. We find that on the ex-day stock prices fall by less than the dividend, which is in line with the findings of several studies based on US and non-US data. The main contributions of this paper are: (1) the rejection of a tax explanation for the stock price drop, because it is inconsistent with the Portuguese tax regime; (2) considering the very small stock price tick and the fact that dividends are always integer multiples of tick size, the discreteness hypothesis of Bali and Hite (Journal of Financial Economics 47(2):127–159, 1998) is also ruled out as a possible explanation for ex-day price movements. We find no evidence of tax related clientele effects. We propose that ex-day price behavior may be an anomaly, reflecting a less than efficient market with low liquidity levels, price stickiness, and insipid arbitrage trading. Copyright International Atlantic Economic Society 2008
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Volume (Year): 36 (2008)
Issue (Month): 1 (March)
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