Hostname: page-component-5c6d5d7d68-qks25 Total loading time: 0 Render date: 2024-08-15T15:53:28.515Z Has data issue: false hasContentIssue false
  • English
  • Français

The Ex-Dividend Behavior of Nonconvertible Preferred Stock Returns and Trading Volume

Published online by Cambridge University Press:  06 April 2009

Scott E. Stickel
Get access Rights & Permissions [Opens in a new window]

Abstract

On average, nonconvertible preferred stocks have significantly positive abnormal returns and trading volume on the ex-day. For the less liquid stocks, however, the abnormal returns are significantly positive, and abnormal trading volume is insignificantly different from zero. This evidence suggests that long-term individual investors set the ex-day prices of less liquid stocks. For the more liquid stocks, the ex-day abnormal returns are closer to zero, and there is significantly positive abnormal trading volume on the ex-day and the day before the ex-day. These results suggest that short-term investors set the ex-day prices of more liquid stocks through dividend capture strategies. Despite this evidence, some inconsistent empirical findings make the overall evidence on dividend capture somewhat mixed.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 26 , Issue 1 , March 1991 , pp. 45 - 61
Copyright
Copyright © School of Business Administration, University of Washington 1991

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ajinkya, B. B, and Jain, P. C.. “The Behavior of Daily Stock Market Trading Volume.” Journal of Accounting and Economics, 11 (11 1989), 331–359.CrossRefGoogle Scholar
Branch, B, and Freed, W.. “Bid-Ask Spreads on the AMEX and the Big Board.” Journal of Finance, 32 (03 1977), 159–163.Google Scholar
Brown, S. J, and Warner, J. B.. “Using Daily Stock Returns: The Case of Event Studies.” Journal of Financial Economics, 14 (03 1985), 3–31.CrossRefGoogle Scholar
Demsetz, H. “The Cost of Transacting.” Quarterly Journal of Economics, 82 (02 1968), 33–53.CrossRefGoogle Scholar
Dubofsky, D. A. “A Market Microstructure Explanation of Ex-Day Abnormal Returns.” Working Paper, Texas A&M Univ. (1989).Google Scholar
Eades, K. M; Hess, P. J.; and Kim, E. H.. “On Interpreting Security Returns during the Ex-Day Dividend Period.” Journal of Financial Economics, 13 (03 1984), 3–34.CrossRefGoogle Scholar
Edmister, R. O. “Commissions and Cost Structure: Shifts and Scale Economies.” Journal of Finance, 33 (05 1978), 477–486.CrossRefGoogle Scholar
Elton, E, and Gruber, M.. “Marginal Stockholder Tax Rates and the Clientele Effect.” Review of Economics and Statistics, 52 (02 1970), 68–74.CrossRefGoogle Scholar
Elton, E; Gruber, M.; and Rentzler, J.. “The Ex-Dividend Day Behavior of Stock Prices: A Reexamination of the Clientele Effect: A Comment.” Journal ofFinance, 39 (06 1984), 551–556.Google Scholar
Fama, E. F, and MacBeth, J. D.. “Risk, Return, and Equilibrium: Empirical Tests.” Journal of Political Economy, (05/06 1973), 607–636.CrossRefGoogle Scholar
Fama, E. Foundations of Finance. New York: Basic Books (1976).Google Scholar
Green, J. “Taxation and the Ex-Dividend Behavior of Common Stock Returns.” Working Paper, NBER #496 (1980).CrossRefGoogle Scholar
Grundy, B. “Trading Volume and Stock Returns around Ex-Dividend Dates.” Working Paper, Graduate School of Business, Univ. of Chicago (1985).Google Scholar
Jaffe, J. “The Effect of Regulation Changes on Insider Trading.” Bell Journal of Economics and Management Science, 5 (Spring 1974), 92–121.Google Scholar
Joehnk, M. D; Bowlin, O. D.; and Petty, J. W.. “Preferred Dividend Rolls: A Viable Strategy for Corporate Money Manager.” Financial Management, 9 (Summer 1980), 78–87.CrossRefGoogle Scholar
Kalay, A. “The Ex-Dividend Day Behavior of Stock Prices: A Reexamination of the Clientele Effect.” Journal of Finance, 37 (09 1982), 1059–1070.Google Scholar
Kalay, A “The Ex-Dividend Day Behavior of Stock Prices: A Reexamination of the Clientele Effect: Reply.” Journal of Finance, 39 (06 1984), 557–563.Google Scholar
Karpoff, J. M, and Walkling, R. A.. “Short-Term Trading around Ex-Dividend Days.” Journal of Financial Economics, 21 (09 1988), 291–298.CrossRefGoogle Scholar
Karpoff, J. M, and Walkling, R. A. “Dividend Capture in NASDAQ Stocks.” Journal of Financial Economics, 23 (forthcoming 1990).Google Scholar
Lakonishok, J, and Vermaelen, T.. “Tax-Induced Trading around Ex-Dividend Days.” Journal of Financial Economics, 16 (07 1986), 287–319.CrossRefGoogle Scholar
Litzenberger, R. H, and Ramaswamy, K.. “The Effect of Personal Taxes and Dividends on Capital Asset Prices.” Journal of Financial Economics, 7 (06 1979), 163–195.CrossRefGoogle Scholar
Mandelker, G. “Risk and Return: The Case of Merging Firms.” Journal of Financial Economics, 1 (12 1974), 303–336.CrossRefGoogle Scholar
Mclnish, T. H, and Puglisi, D. J.. “The Ex-Dividend Behavior of Preferred Stocks.” Review of Business and Economic Research, 16 (Fall 1980), 81–90.Google Scholar
Miller, M. H., and Scholes, M. S.. “Dividends and Taxes: Some Empirical Evidence.” Journal of Political Economy, 90 (12 1982), 1118–1141.CrossRefGoogle Scholar
Scholes, M., and Williams, J.. “Estimating Beta from Nonsynchronous Data.” Journal of Financial Economics, 5 (12 1977), 309–327.CrossRefGoogle Scholar
Stickel, S. E. “Empirical Tests Using Daily Preferred Stock Returns.” Ph.D., Diss., Graduate School of Business, Univ. of Chicago (1985).Google Scholar
Stoll, H. R, and Whaley, R. E.. “Transaction Costs and the Small Firm Effect.” Journal of Financial Economics, 12 (06 1983), 57–79.CrossRefGoogle Scholar
Walkling, R. A, and Edmister, R. O.. “Are There Commission Cost Side-Effects from Portfolio Management Decisions?” Financial Analysts Journal, 39 (07–08 1983), 52–59.CrossRefGoogle Scholar