Creator

• Jagannathan, Ravi
• Murray, Frank

Series

• Staff report (Federal Reserve Bank of Minneapolis. Research Department)

Issue number

• 229

Date created

• 1997-03

Abstract

• It is well documented that on average, stock prices drop by less than the value of the dividend on ex-dividend days. This has commonly been attributed to the effect of tax clienteles. We use data from the Hong Kong stock market where neither dividends nor capital gains are taxed. As in the U.S.A. the average stock price drop is less than the value of the dividend; specifically, in Hong Kong the average dividend was HK $0.12 and the average price drop was HK $0.06. We are able to account for this both theoretically and empirically through market microstructure based arguments.

Subject (JEL)

• G35 - Payout Policy
• G12 - Asset Pricing; Trading Volume; Bond Interest Rates

Keyword

• Market microstructure
• Dividends
• Asset pricing
• Bid-ask spread

Related information

• Published in: Journal of Financial Economics (Vol. 47, No. 2, February 1998, pp. 161-188) https://doi.org/10.1016/S0304-405X(97)80053-0.

Corporate Author

• Federal Reserve Bank of Minneapolis. Research Department

Publisher

• Federal Reserve Bank of Minneapolis

Resource type

• Research Paper

DOI

•  https://doi.org/10.21034/sr.229

License

• Creative Commons BY-NC Attribution-NonCommercial 4.0 International

In Collection:

• Staff Reports

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