IDEAS home Printed from
   My bibliography  Save this article

An empirical analysis of stock returns around dividend changes


  • Rakesh Bali


This paper documents significant drift in stock returns following announcements of changes in cash dividends. The magnitude is (i) smaller for increases than for decreases, (ii) inversely related to firm size and positively to dividend yield change, and (iii) concentrated in the first quarter. Beta changes do not explain the drift and it is robust in various subperiods. Next it is shown that dividend increases are positively autocorrelated especially every fourth quarter. The prices keep reacting to future announcements as if the market ignores these autocorrelations. Dividend decreases exhibit weak autocorrelation and the returns are negative for the following three announcements.

Suggested Citation

  • Rakesh Bali, 2003. "An empirical analysis of stock returns around dividend changes," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 51-61.
  • Handle: RePEc:taf:applec:v:35:y:2003:i:1:p:51-61
    DOI: 10.1080/0003684020158930

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Hausman, Jerry A & Wise, David A, 1978. "A Conditional Probit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences," Econometrica, Econometric Society, vol. 46(2), pages 403-426, March.
    2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    3. Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
    4. Herriges, Joseph A. & Kling, Catherine L., 2003. "Recreation Demand Models," Staff General Research Papers Archive 10211, Iowa State University, Department of Economics.
    5. Bhat, Chandra R., 1998. "Accommodating flexible substitution patterns in multi-dimensional choice modeling: formulation and application to travel mode and departure time choice," Transportation Research Part B: Methodological, Elsevier, vol. 32(7), pages 455-466, September.
    6. Algers, S. & Bergstrom, P. & Dahlberg, M. & Dillen, J.L., 1998. "Mixed Logit Estimation of the Value of Travel Time," Papers 1998:15, Uppsala - Working Paper Series.
    7. Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November.
    8. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    9. Brownstone, David & Bunch, David S. & Train, Kenneth, 2000. "Joint mixed logit models of stated and revealed preferences for alternative-fuel vehicles," Transportation Research Part B: Methodological, Elsevier, vol. 34(5), pages 315-338, June.
    10. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
    11. David Hensher & April Reyes, 2000. "Trip chaining as a barrier to the propensity to use public transport," Transportation, Springer, vol. 27(4), pages 341-361, December.
    12. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
    13. Krinsky, Itzhak & Robb, A Leslie, 1986. "On Approximating the Statistical Properties of Elasticities," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 715-719, November.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Darakhshan Younis & Attiya Yasmin Javid, 2014. "Market Imperfections and Dividend Policy Decisions of Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:99, Pakistan Institute of Development Economics.
    2. Al-Malkawi, Husam-Aldin Nizar & Bhatti, M. Ishaq & Magableh, Sohail I., 2014. "On the dividend smoothing, signaling and the global financial crisis," Economic Modelling, Elsevier, vol. 42(C), pages 159-165.
    3. repec:spr:jecfin:v:41:y:2017:i:3:d:10.1007_s12197-016-9362-x is not listed on IDEAS
    4. Matthias Nnadi & Nyema Wogboroma & Bariyima Kabel, 2013. "Determinants of Dividend Policy: Evidence from Listed Firms in the African Stock Exchanges," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 725-741, December.
    5. Shaif Jarallah & Wali Ullah, 2014. "Evolving corporate governance and the dividends behaviour regime in Japan," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 279-303, September.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:35:y:2003:i:1:p:51-61. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.