Stock-Market Behavior on Ex-Dates: New Insights from German Stocks with Tax-Free Dividend

Language
en
Document Type
Article
Issue Date
2020-12-30
First published
2020-09-21
Issue Year
2020
Authors
Kreidl, Felix
Editor
Publisher
MDPI
Abstract

We examine stock prices and the number of stocks traded around ex-dividend dates of German stocks with tax-free dividend. Tax-free dividends are temporarily tax-exempt, as they reduce the initial purchasing price of a stock. With our analysis of this particular group of German stocks, we can make clear predictions regarding ex-date prices and analyze the number of stocks traded around ex-dates, doing so without the systematic bias of cum-ex trades over time. For XETRA, our empirical results indicate that ex-date prices decline, on average, by the amount of the dividend. We do not find a significant relationship between a stock’s price-drop ratio and dividend yield. Further, the empirical analysis suggests that there is no significant correlation between an abnormal number of a stock being traded and its dividend yield. These results are most consistent with tax-motivated reasoning. However, our volume analysis reveals no consistency regarding the abnormal number of stocks traded for multilateral trading facilities.

Journal Title
International Journal of Financial Studies
Volume
8
Issue
3
Citation
International Journal of Financial Studies 8.3 (2020). <https://www.mdpi.com/2227-7072/8/3/58>
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