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Ex-dividend day price and volume: the case of cum-ex trading

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  • Moritz Wagner
  • Xiaopeng Wei

Abstract

In this paper, we analyse the extent of cum-ex trading in European markets. We document that the abnormal trading activity around the dividend day of a stock can be attributed to cum-ex trading, in addition to existing tax clientele hypotheses. Cum-ex trading is positively associated with dividend yield, which is consistent with maximizing returns from this strategy. Based on abnormal trading volume, we estimate a substantial loss to treasuries due to illicit tax refunds of withholding tax on dividends. Our results are robust, controlling for confounding effects and investors’ tax preference and heterogeneity.

Suggested Citation

  • Moritz Wagner & Xiaopeng Wei, 2023. "Ex-dividend day price and volume: the case of cum-ex trading," Applied Economics, Taylor & Francis Journals, vol. 55(51), pages 6062-6075, November.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:51:p:6062-6075
    DOI: 10.1080/00036846.2022.2141450
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