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Testing for Multiple Types of Marginal Investor in Ex-day Pricing

  • Bartholdy, Jan


    (Department of Finance, Aarhus School of Business)

  • Briown, Kate


    (University of Otago)

The observed changes in share prices at the ex-dividend day have led researchers to look for a single marginal investor type, either a long or a short term trader, to explain the particular patterns in returns in different markets - dominating equilibrium. This paper provides a model which extends this research in three directions. One, it allows for the possibility that different types of traders may influence different stocks thereby generating a separating equilibrium. Two, it identifies an additional marginal investor who has the option of being taxed as a short term or long term trader. Three, it explicitly models the fact that it can take can be a considerable time lag from the time a dividend based trade is made until taxes have to be paid on that trade. A unique data set from New Zealand is used for the empirical analysis. Evidence of a separating equilibrium with at least two types of marginal investors is found

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Paper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 02-12.

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Length: 35 pages
Date of creation: 02 Jun 2002
Date of revision:
Handle: RePEc:hhb:aarfin:2002_012
Contact details of provider: Postal: The Aarhus School of Business, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
Fax: + 45 86 15 19 43
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