On interpreting security returns during the ex-dividend period

In this paper we examine the ex-dividend day returns of several taxable and non-taxable distributions. The ex-dividend day returns for the taxable common stocks are consistent with the hypothesis that dividends are taxed more heavily than capital gains. However, the ex-dividend day returns of prefer...

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Veröffentlicht in:Journal of financial economics 1984-03, Vol.13 (1), p.3-34
Hauptverfasser: Eades, Kenneth M., Hess, Patrick J., Kim, E.Han
Format: Artikel
Sprache:eng
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Zusammenfassung:In this paper we examine the ex-dividend day returns of several taxable and non-taxable distributions. The ex-dividend day returns for the taxable common stocks are consistent with the hypothesis that dividends are taxed more heavily than capital gains. However, the ex-dividend day returns of preferred stocks suggest that preferred dividends are taxed at a lower rate than capital gains; non-taxable stock dividends and splits are priced on ex-dividend days as if they are fully taxable; and non-taxable cash distributions are priced as if investors receive a tax rebate with them. We also find that each of these distributions exhibits abnormal return behavior for several days surrounding the ex-dividend day. We investigate several possible explanations for this anomaly, but none is capable of explaining the phenomenon.
ISSN:0304-405X
1879-2774
DOI:10.1016/0304-405X(84)90030-8