The ex-dividend period stock price behavior in Finland during 2003–2014
Ottoila, Antti (2015)
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The purpose of this thesis is to examine the ex-dividend period stock price behavior on
the Finnish stock market during 2003–2014. The data consists of 269 ordinary and extra ex-dividend periods of 24 stocks traded on the Helsinki Stock Exchange. The time period of the study contains the financial crisis of 2007–2009 and several changes in the capital income tax legislation affecting both dividend and capital gains taxation. Event-study
methodology is applied to analyze the ex-dividend period stock price behavior.
Previous studies have shown the ex-dividend day stock price drop to be less than the dividend. However for high dividend yield stocks the price drop has been reported to be greater than the dividend. The first part of this thesis investigates the ex-dividend day stock price drop and it's characteristics on the Finnish stock market during 2003–2014. This study confirms the presence of an ex-dividend day stock price drop less than the dividend for low dividend yield stocks and a stock price drop greater than the dividend for the highest dividend yield stocks. For medium dividend yield stocks the stock price drop was statistically indistinguishable from 1.
The second part of this thesis investigates the presence of abnormal returns in the exdividend
period. Several studies have detected positive abnormal returns shortly before the ex-dividend day and negative abnormal returns immediately after. The ex-dividend period examined was 20 trading days around the ex-dividend day. Abnormal returns were detected on the 5-day periods immediately before and after the ex-dividend day, on the ex-day itself and on the 5-day period staring 16 days after the ex-day. The returns were more pronounced when high and low dividend yield stocks were examined separately. The presence of abnormal returns on the ex-dividend day supported the findings in the first part of the study. High dividend yield stocks had negative abnormal
returns on the ex-day corresponding with the stock price falling more than the amount of the dividend. The abnormal returns on the ex-day for the low yield stocks were positive and consistent with the observed ex-day stock price drop of less than the dividend amount.
the Finnish stock market during 2003–2014. The data consists of 269 ordinary and extra ex-dividend periods of 24 stocks traded on the Helsinki Stock Exchange. The time period of the study contains the financial crisis of 2007–2009 and several changes in the capital income tax legislation affecting both dividend and capital gains taxation. Event-study
methodology is applied to analyze the ex-dividend period stock price behavior.
Previous studies have shown the ex-dividend day stock price drop to be less than the dividend. However for high dividend yield stocks the price drop has been reported to be greater than the dividend. The first part of this thesis investigates the ex-dividend day stock price drop and it's characteristics on the Finnish stock market during 2003–2014. This study confirms the presence of an ex-dividend day stock price drop less than the dividend for low dividend yield stocks and a stock price drop greater than the dividend for the highest dividend yield stocks. For medium dividend yield stocks the stock price drop was statistically indistinguishable from 1.
The second part of this thesis investigates the presence of abnormal returns in the exdividend
period. Several studies have detected positive abnormal returns shortly before the ex-dividend day and negative abnormal returns immediately after. The ex-dividend period examined was 20 trading days around the ex-dividend day. Abnormal returns were detected on the 5-day periods immediately before and after the ex-dividend day, on the ex-day itself and on the 5-day period staring 16 days after the ex-day. The returns were more pronounced when high and low dividend yield stocks were examined separately. The presence of abnormal returns on the ex-dividend day supported the findings in the first part of the study. High dividend yield stocks had negative abnormal
returns on the ex-day corresponding with the stock price falling more than the amount of the dividend. The abnormal returns on the ex-day for the low yield stocks were positive and consistent with the observed ex-day stock price drop of less than the dividend amount.