The Ex-dividend Day Stock Price Behavior Reasearch

Ex-dividend day stock price behavior research has always been a hot research field of corporate finance, early in1955, Campbell and Beranek had found that the ex-dividend stock price decline date is less than the dividend, They use the New York Stock Exchange data for the emprical analysis, and found that the ex-dividend stock price decline only90%of dividend. Although this ex-dividend phenomenon has long known, scholars have been unable to give the appropriate explain theory, Until in1970, Elton and Gruber give the analysis research on ex-dividend stock price from the perspective of different tax rates. During the next40years, the ex-dividend phenomenon has caused many scholars’ research interest. Many people devoted themselves to the ex-dividend stock price behavior research, but so far people are not yet reach the consensus on the ex-dividend day phenomenon, the ex-dividend stock price behavior research is still a long way to go.This paper is based on the summarizes of absorbing foreign ex-dividend day stock price behavior theory, Starting from the actual situation of Chinese stock market, We have researched the taxes, transaction costs, market micro structure, trading risk, and investors’ heterogeneity factors impac on the ex-dividend stock price behavior. Through the research of Chinese stock market, on one hand we can build appropriate ex-dividend stock price behavior theory suited to Chinese stock market, enrich the research field, and on the other hand, we can lead the direction of future research.In addition to the Chapter1introduction and Chapter7conclusions, the core of this paper can be divided into three levels, the first level is the second chapter, mainly introduces the ex-dividend day stock price behavior research literature, provided a theoretical basis and analytical tools for the article; The second level is construced by the chapter3,chapter4and chapter5, respectively starting from the taxes, transaction costs and market microstructure analysis of ex-dividend stock price behavior. Build corresponding theoretical model, and use the sample data of Chinese A share and Hong Kong stock market for the empirical test of the theory. Finally the third level is the chapter6, starting from the investors’ utility function, we introduced the trading risk and investor heterogeneity factors, build trades dynamic equilibrium model, and give a comprehensive analysis of the impact of various factors on the ex-dividend stock price behavior. This paper is mainly based on these three levels to expand.Chapter2is the literature review of this paper, Since1955Campbell and Beranek found the abnormal ex-dividend day stock price behavior, many scholars make some research on the ex-dividend day stock price behavior from different angles and using different sample data. And give many classical theory, which including the tax burden effect theory, short-term trading theories and market microstructure theory. All of these documents are the basic information of ex-dividend day stock price behavior study. This paper collected these literature as the knowledge reserves for the stock prices behavior research below.In the second level, the third chapter is mainly research the tax impact of stcok price behavior on the ex-dividend day, first, Starting from the classic tax burden effect theory this paper use the sample of A shares, and do hypothesis testing for the tax effect, and found that ex-dividend day stock price decline rate(PDR) and the dividend rate have a negative correlation, and there is a positive correlation between ex-dividend day yield rate and tax rate; Subsequently we also do some expandsion for this theory, relax the stock selling time limitation and allow investors holding the stock for some time before carrying out the dividend capture. Considered the capital gain tax time value,we use the A share sample for the empirical testing for the new modle, and found that ex-dividend day stock decline rate is also affected by the stock’s recent price impact, there is a positive relationship between stock price appreciation and the PDR, and this relationship have been affected by the dividend rate and recent price changes direction.In chanpter4, we studied the impact of transaction cost on the ex-dividend stock price behavior, because the transaction costs can hinder the investors to arbitrage trading, so even if there is no difference in tax rates between dividends and capital gains, investors can not gain profit by arbitrage trading. This paper examined transaction cost impact on the excess volumes and excess returns around the ex-dividend day, and using A-share market sample for the empirical test, we find that ex-dividend excess return is positive, and will become negative on post-dividend day, this number have a negative relationship with excess trading volume. We also find dividend rate have a positive relationship with excess return and excess volume. Overall, we the A-share market does exist the short-term trading practices, but due to the low degree of stock market impact,the ex-dividend day abnormal transactions is still not obvious enough.In the chapter5, we do ex-dividend day stock price behavior research from the perspective of market microstructure. First we analyze the tick size affection on the stock price behavior on ex-dividend day. Because the tick size mechanism does not exist in Chinese A share market, and the number of sample in B-share market is very rare, finally we choose the Hong Kong stock market data for the empirical test. And find that tick size does have a significant impact on stock price behavior, ex-dividend day stock price decline is strictly less than the dividend, the difference between stock decline and dividend is less than tick size, and PDR ratio strictly less than1, and increase with the rising of dividend, when the dividend is the multiples of tick size, this ratio will decline, so the overall performance is a zigzag structure; Secondly we divided the investor in the market into buyer, seller, market makers and noise trader, research the trading behavior of investors respectively, and found that the majority of buyers will buy shares on the ex-dividend day, seller tend to advance trading, and will sale shares on share registration day, so on ex-dividend day traders will buy or sell stock on "market maker selling price", and will trade the stock on "market maker buying price" on share registration day. This trading model reduced the ex-dividend day stock price decline rate. Because the Hong Kong stock market does exist dividend and capital gain tax, and there is no tax effect impaction. So we still choose the Hong Kong stock market data to verify the ex-dividend day stock price behavior.In the third level, we study the affection of investors’ heterogeneous on ex-dividend day stock price behavior, this is different from the previous two-stage equilibrium model, We added a liquidating day, and build a dynamic equilibrium model of ex-dividend day stock price behavior. We still starting from the market microscopic point, introduce the investors’ utility function, from the individual investor’s optimal stock holdings, we deduced the stock equilibrium price and stock trading volume of the whole market. We found that the ex-dividend day stock price is about the function of average investors’ dividend preference level and trading risk level. Even in the economic environment that there is no transaction costs, the ex-dividend day stock price decline is not nessarily equal to the dividend, because there exist the risk factor, so in reality environment there is no investor unlimited held the stock position. In addition we also found the excess trading volume is the increasing function of investor’s hegerogeneity, and have a positive relationship with dividend yield, have a negative relationship with stock variance. Using the Chinese A-share listed companies date for the empirical test, we find that all empirical results are exactly equal to the predicted results of the dynamic equilibrium model.This paper includes the following innovations:First, unlike the Elton and Gruber(1970)assumptions, we believe that investors do not have to sell stock on stock registration day or ex-dividend day, actually investors have the option to defer capital gains, and to extense the time of payment of the capital gains tax. If the stock has appreciated rapidly when he buy the stock, the revenue to delay confirmation of capital gains tax may exceed the high tax costs. Currently people has not yet conducted the in-depth study on this investment behavior.Secondly, we assumed that the investor can configure the risk asset and the risk-free asset between ex-dividend day and share registration day, to get rid of the static equilibrium model of the two-phase of the ex-dividend day stock price behavior, we build dynamic equilibrium circumstances, examining the optimal risk asset holdings of individual investors. And calculate the amount of stock trading. In addition, we also introduced the risk factor to the model, and found that trading risk can hinder investors to conduct arbitrage trading.Finally, in the classic tax burden effect theory, we know that the difference between dividend and capital gains tax rate is the main reason for the ex-dividend phenomenon, however, the tax rate between the edge investor may be difference in the real economic environment. Unlike the traditional theory, this paper starting from the investor heterogeneity, find that the ex-dividend day stock price decffie ratio depends not only on the dividend preference level of edge investor, but on the weighted average dividend preference of all investors(weighted by the investor’s risk tolerance), there is a positive correlation between excess trading volume and investors’ heterogeneity.