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Taxation And The Ex Dividend Day Behavior Of Common Stock Prices
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Book Synopsis Taxation and the Ex-dividend Day Behavior of Common Stock Prices by : Jerry Green
Download or read book Taxation and the Ex-dividend Day Behavior of Common Stock Prices written by Jerry Green and published by . This book was released on 1980 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: The behavior of stock prices around ex-dividend days has been suggested as evidence for tax-induced clientele effects and as a means to estimate the average effective tax rate faced by investors. In this paper these possibilities are examined theoretically and empirically. Theoretically it is shown that the measured price drop per dollar of dividend may provide a biased estimate of the effective tax rate. Looking at the volume of trade around ex-dividend days we show that the conditions under which it would be unbiased are unlikely to hold. Strong evidence, based on a broader database than that used by previous investigators, is presented for the presence of the clientele effect
Book Synopsis Taxation and the Ex-divided Day Behavior of Common Stock Prices by : Jerry R. Green
Download or read book Taxation and the Ex-divided Day Behavior of Common Stock Prices written by Jerry R. Green and published by . This book was released on 1980 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Taxation of Capital Gains and the Behavior of Stock Prices Over the Dividend Cycle by : Dan Palmon
Download or read book Taxation of Capital Gains and the Behavior of Stock Prices Over the Dividend Cycle written by Dan Palmon and published by . This book was released on 2013 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: By limiting their attention to the effect of capital gains tax on the price asked by mid-cycle sellers, Elton and Gruber (Review of Economics and Statistics v.52, 1970) overlook a parallel effect of capital loss credit on the bid price offered by mid-cycle buyers. We show that unequal marginal tax rates on capital gains and losses create two distinct price paths with a growing bid-ask spread between them. The dividend cycle ends with a corresponding drop of the dual price to a temporary common ex-dividend price. As perceived by shareholders, the mid-cycle bid-ask spread created in this fashion may add a significant trading cost beyond the observed market-price spread. Our analysis has important implications for shareholders' optimal timing of trade, the firm's optimal frequency and timing of dividends within the year, and government tax policy. A government seeking to tax capital gains should maintain parity between the tax rates of gains and losses to avoid the introduction of tax-induced trading costs. Absent rate parity, the firm should accommodate shareholders by following a predictable dividend schedule and avoiding extended intervals between dividends. Under this scenario, shareholders can avoid tax-induce trading costs by limiting their transactions to ex-dividend days.
Book Synopsis The Effect of Tax Heterogeneity on Prices and Volume Around the Ex-Dividend Day by : Roni Michaely
Download or read book The Effect of Tax Heterogeneity on Prices and Volume Around the Ex-Dividend Day written by Roni Michaely and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: To investigate the effect of taxation on stock price and trading volume around the ex-dividend day, we use the Italian stock market, where dividends on two classes of stock are taxed differently. When all investors face identical tax rates on dividends (holders of savings stocks), we find that the average price decline between the cum-and the ex-dividend day equals the after-tax valuation of dividends, and that there is no excess volume around the ex-day. When the tax rate on dividend income varies across investors (the common stock sample), we find significant excess volume around the ex-dividend day, as well as an average price decline smaller than the minimum after-tax valuation of dividends. The latter finding is inconsistent with the pure tax-trading hypothesis. It may be explained by the confounding registration effect: individual investors sell the stock prior to the ex-day to maintain their fiscal anonymity. However, a study of block trading activity, which is done by traders who are not subject to the registration effect, shows evidence consistent with the notion that a significant portion of the ex-dividend day trading is motivated by the differential valuation of dividends relative to capital gains. We also show that higher transaction costs result in higher ex-dividend day excess returns and lower abnormal volume. This finding is consistent with quot;profit eliminationquot; activity by institutions and corporations.
Book Synopsis The Ex-Dividend-Day Behavior of Stock Prices by : Kiyoshi Kato
Download or read book The Ex-Dividend-Day Behavior of Stock Prices written by Kiyoshi Kato and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a comprehensive empirical analysis of stock-price behavior around the ex-dividend day in Japan. We find that prices rise on the ex-day and that dividend-related tax effects appear to be secondary. Returns around ex-dividend days are dominated by the proximity of many ex-days to the fiscal year-end. Excess returns of 1%, which are independent of any dividend-related considerations, are higher than round-trip transaction costs on medium-sized transactions. Prices seem to imply selling pressure before, and buying pressure at the start of, the new fiscal year. These trading patterns appear to be motivated by intercorporate manipulative trading around the end of the firms' fiscal year, which are unrelated to dividends.
Book Synopsis An International Analysis of Factors Affecting Ex-dividend Day Stock Prices by : J. Thomas Connelly
Download or read book An International Analysis of Factors Affecting Ex-dividend Day Stock Prices written by J. Thomas Connelly and published by . This book was released on 2007 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate stock price changes on the ex-dividend day in 37 countries. We hypothesize that, in addition to taxes, other market frictions should also affect ex-dividend day stock prices in world markets. Empirical results show that mean price drop ratios deviate significantly from their predicted values based on differential tax rates between dividends and capital gains, and that proxies for agency conflicts and information asymmetry also help explain these cross-country deviations. After controlling for these factors, the weighted average of investors' tax rate is reflected in the ex-dividend day price movements. The results are consistent with the idea that agency conflicts, information asymmetry and differential taxation of dividends and capital gains are all important factors affecting ex-dividend day stock prices in world markets.
Book Synopsis Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior - Thirty-Two Years Later by : Edwin J. Elton
Download or read book Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior - Thirty-Two Years Later written by Edwin J. Elton and published by . This book was released on 2010 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since Elton and Gruber's (Eamp;G) original article on taxes and ex-dividend price behavior was published in 1970, over 100 articles have appeared in the leading journals of financial economics examining whether prices fall by less than the dividends and, if so, whether or not the phenomenon is due to tax effects, market microstructure effects, or some other effect. The microstructure argument is the most serious alternative to the tax argument. All of the microstructure arguments state that the fall in stock price should be less than the dividend, regardless of whether the dividend is taxable or tax-advantaged. By testing ex-dividend effects on a sample of closed-end funds where dividends are taxadvantaged, we find that taxes should and do cause the fund price to fall by more than the amount of the dividend. This is consistent with a tax argument and inconsistent with a microstructure argument. Examining the sample of tax-free dividends, we find that the Eamp;G and return measures change across two tax regimes exactly as theory suggests they should if taxes mattered. We then examine non-tax-advantaged closed-end funds. For these funds we should find the traditional ex-dividend tax effects: the fall in price on the ex-dividend date should be less than the dividend during periods when capital gains taxes are less than income taxes. This is what we find. Furthermore, the ex-dividend behavior of these funds generally moves in the direction we would expect across two changes in tax regimes. The taxable sample not only substantiates the tax effect, it also demonstrates that the fall in price greater than the dividend for closed-end municipal bond funds was not due to some peculiar aspect of either our methodology or the closed-end fund industry. Thirty-two years after Eamp;G's original study, we find new and compelling evidence that taxes play an important part in affecting share price changes.
Book Synopsis Insights Into the Ex-Dividend Behavior of Stock Prices by : C Justin Robinson
Download or read book Insights Into the Ex-Dividend Behavior of Stock Prices written by C Justin Robinson and published by . This book was released on 2016 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper adds to the literature on the behavior of stock prices around the ex-dividend date by providing evidence on the behavior of stock returns and trading volumes around the ex-dividend date in the unique environment of the Jamaica Stock Exchange. The Jamaica Stock Exchange is characterized by two major changes to the dividend tax rate in recent years and the absence of any capital gains tax, short selling or market makers. Using the event-study methodology, the paper finds that changes in the dividend tax rate produces major changes in the price drop ratio and abnormal returns in one instance but not in the other, while trading volumes increase around the ex-dividend date regardless of the tax regime. These results suggest that while tax differentials between capital gains and dividends can play a major role in the ex-dividend behavior of stock prices, it may not provide a complete explanation of such.
Book Synopsis The Ex-Dividend Day Stock Price Behavior in the Chinese Stock Market by : Nickolaos G. Travlos
Download or read book The Ex-Dividend Day Stock Price Behavior in the Chinese Stock Market written by Nickolaos G. Travlos and published by . This book was released on 2002 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the ex-dividend day stock price behavior in the Chinese stock market. This market, where dividends could be either taxable or non-taxable, allows us to examine the impact of tax effects while keeping any microstructure factors constant. The findings from non-taxable stocks show that their price, on the ex-dividend day, falls by an amount that equals the dividend. For the taxable sample, stock prices of small dividend yield stocks drop proportionally to the dividend paid. For the large dividend yield stocks, the price adjustment depends on the effective tax rate on dividend income. The overall findings are consistent with the tax hypothesis.
Book Synopsis Ex-Dividend Day Returns When Dividend and Capital Gains are Taxed at the Same Rate by : Josep Garcia-Blandon
Download or read book Ex-Dividend Day Returns When Dividend and Capital Gains are Taxed at the Same Rate written by Josep Garcia-Blandon and published by . This book was released on 2015 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: Due to the overwhelming international evidence that stock prices drop by less than the dividend paid on ex-dividend days, the ex-dividend day anomaly is considered a stylized fact. Two main approaches have emerged to explain this empirical regularity: the tax-clientele hypothesis and the microstructure of financial markets. Although the most widely accepted explanation for this fact relies on taxes, the ex-dividend day anomaly has been reported even in countries where neither dividends nor capital gains are taxed. The 2006 tax reform in Spain established the same tax rate for dividends and capital gains. This paper investigates stock returns on ex-dividend days in the Spanish stock market after the 2006 tax reform using a random coefficient model. Contrary to previous research, we do not observe an ex-dividend day anomaly. Unlike previous investigations, which are mostly concerned with suggesting explanations as to why this anomaly has occurred, we are in the somewhat strange position of discussing why this anomaly has not occurred. Our findings are robust across companies and stock dividend yields, thus supporting a tax-based explanation for the ex-dividend day anomaly.
Download or read book Ticks and Tax written by C. Bryan Cloyd and published by . This book was released on 2004 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine ex-dividend day stock price behavior before and after the NYSE converted from discrete (1/16ths) to decimal pricing systems in early 2001, as well as the effect of equalizing the federal income tax rates on dividend and long-term capital gain income in May 2003. Prior literature reports a robust empirical result that share prices decrease on the ex-dividend day by less than the amount of the dividend, but there is little agreement about whether this incomplete price adjustment is caused by share price discreteness, differential taxation of dividend income relative to capital gains, or other factors. Two recent studies, Graham, Michaely and Roberts (2003) and Jakob and Ma (2004), report that declining price discreteness (e.g. from 1/16ths to decimal pricing) had no material effect on the cum- to ex-day price-drop-to-dividend ratio. Although we report similar findings for the price-drop ratio, we find that ex-day abnormal returns declined significantly as a result of decimalization in 2001, and declined further in response to tax rate equalization in May 2003. Thus, our findings support the view that both price discreteness and differential taxation affect ex-dividend day stock price behavior.
Book Synopsis Investors' Heterogeneity, Prices, and Volume Around the Ex-dividend Day by : Roni Michaely
Download or read book Investors' Heterogeneity, Prices, and Volume Around the Ex-dividend Day written by Roni Michaely and published by Palala Press. This book was released on 2018-03-02 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact, and remains as true to the original work as possible. Therefore, you will see the original copyright references, library stamps (as most of these works have been housed in our most important libraries around the world), and other notations in the work. This work is in the public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. As a reproduction of a historical artifact, this work may contain missing or blurred pages, poor pictures, errant marks, etc. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Book Synopsis Further Evidence on Dividend Yields and the Ex-Dividend Day Stock Price Effect by : Ravinder K. Bhardwaj
Download or read book Further Evidence on Dividend Yields and the Ex-Dividend Day Stock Price Effect written by Ravinder K. Bhardwaj and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Ex-dividend day stock price behavior supports discreteness and tax clientele effects. The effects are still found after the Tax Reform Act of 1986. Results reflect an effective tax advantage for capital gains taxes payable at realization, versus dividend taxes due quarterly. Evidence also supports short-term trader participation in the ex-day phenomenon when the difference between dividend income and the ex-dividend day price decrease exceeds transaction costs to trade. Results contradict prior research where a tax clientele effect is not found, but align with the same prior research when including a small number of contaminated observations.
Book Synopsis Ex-Dividend Day Behaviour in the Absence of Taxes and Price Discreteness by : Khamis Al-Yahyaee
Download or read book Ex-Dividend Day Behaviour in the Absence of Taxes and Price Discreteness written by Khamis Al-Yahyaee and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the ex-dividend day behaviour in a unique setting where (1) there are neither taxes on dividends nor on capital gains, (2) stock prices have been decimalized, (3) dividends are distributed annually, and (4) we have data that enable us to examine bid-ask bounce effects. In this economy, any price decline that is smaller than the dividends can not be attributed to taxes and price discreteness. Like previous studies, we find that the stock price drops by less than the amount of dividends and there is a significant positive ex-day return. By examining abnormal volumes around the ex-dividend day, we find no evidence of short-term trading. We are able to account for our results using market microstructure models. When the impact of market microstructure is taken into account, the ex-dividend drop is not significantly different to the value of the dividend paid.
Book Synopsis Taxation and the Ex-dividend Day Behaviour of Security Prices by : Stephen Eliot Binder
Download or read book Taxation and the Ex-dividend Day Behaviour of Security Prices written by Stephen Eliot Binder and published by . This book was released on 1985 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Ex-Dividend Day Stock Price Behavior in the Athens Stock Exchange by : Nickolaos G. Travlos
Download or read book The Ex-Dividend Day Stock Price Behavior in the Athens Stock Exchange written by Nickolaos G. Travlos and published by . This book was released on 2001 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the ex-dividend day stock price behavior in the Athens Stock Exchange (ASE) over the period 1994-1999. This market is chosen because neither dividends nor capital gains are taxed and the ASE is not associated with the microstructure effects analyzed in prior studies. Our findings show that on the ex-dividend day, stock prices fall by less than the dividend paid. These findings cannot be attributed to tax effects. Although our evidence might be attributed to microstructure effects, we argue that the particular microstructure effects identified by prior studies may not be the determinant factors.
Book Synopsis Investors' Heterogeneity, Prices, and Volume Around the Ex-Dividend Day (Classic Reprint) by : Roni Michaely
Download or read book Investors' Heterogeneity, Prices, and Volume Around the Ex-Dividend Day (Classic Reprint) written by Roni Michaely and published by Forgotten Books. This book was released on 2018-01-29 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from Investors' Heterogeneity, Prices, and Volume Around the Ex-Dividend Day Our analysis shows that unless a perfect tax clientele exists, it is not possible to infer tax rates from price alone. [by a perfect tax clientele we mean that each tax group hold different securities, and all trading is intra-group trading. See Miller and Modigliani (1961) and Elton and Gruber However, the cross-sectional distribution of tax rates can be inferred by using both price and volume data. This point can be illustrated using the following stylized example. Assume that there are three groups of traders in the marketplace with a marginal rate of substitution between dividends and capital gains income of and respectively. Assume further that the average price drop relative to the dividend amount is Using the standard analysis, we may conclude that the second group dominates the ex-dividend day price determination. However. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
