Marginal Stockholder Tax Effects and Ex-Dividend-Day Price Behavior: Evidence From Taxable Versus Nontaxable Closed-End Funds
Almost all research on the movement of stock prices on ex-dividend days has found that prices decline by less than the dividend. Though this is consistent with tax effects, several papers have argued that this phenomenon could be caused by market microstructure effects. In this paper we make use of a natural experiment that provides support for the tax explanations of ex-dividend behavior. Some closed-end funds have taxable, and some have nontaxable, dividend distributions. Both types are subject to taxes on capital gains. The implication of this for ex-dividendday price behavior is very different between these two types of funds if taxes matter. This paper demonstrates that the direction of ex-dividendday price behavior is consistent with a tax explanation and that ex-dividend-day price behavior changes, as theory would suggest, with changes in the tax law. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 87 (2005)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:87:y:2005:i:3:p:579-586. 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: (Kristin Waites)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.