Validation Of The Ex-dividend Date "tax Effect" And "short-term Trading Practices"

The ex-dividend day stock price behavior has been one of the puzzle about the academic study, foreign theorists emerged two classic factions of the ex-dividend day stock price behavior, the first theory is the "tax effect" theory, the core of the theory is that different tax burden cause the ex-dividend day stock price drop less than the amount of the cash dividend, the second theory is the "short-term trading behavior" theory, the core of the theory is that if the ex-dividend day abnormal returns occur, then in the presence of transaction costs circumstances, the abnormal returns will reduce to the amount of transaction costs. In addition to these two theories some scholars tried to find the other factors from the micro structure of stock market to explain the ex-dividend day abnormal stock price behavior,the more general research is from the smallest unit of the stock price quoting system, which will led to the price of the ex-dividend date non-continuity.Outside of the ex-dividend day stock price behavior carried out in full swing, my existing literature on the ex-dividend day behavior of stock price volatility was not a lot, they only test the "tax effect" hypothesis, but not put the "short-term trading" hypothesis on the empirical research. Therefore, this paper not only test the "tax effect" hypothesis, but also test the "short-term trading" hypothesis in-depth research. In the empirical study, the paper uses event analysis and portfolio analysis and so on, the incident point as a node, the overall sample is divided into different time periods, by comparing values at different period to infer the price behavior on the ex-dividend day, then analysis the overall sample in the ex-dividend day, this paper divide the whole sample into 5×5 combination by dividend rates and transaction costs in ascending and find a more intuitive impact of the factors ex-dividend day abnormal returns through the portfolios. The empirical results show that the "tax effect" hypothesis in China does exist, and to some extent is due to different tax rates between the individual investor dividends rates and capital gains tax rates, but near the ex-dividend date does not found the abnormal returns and abnormal trading volume occurs, therefore, this paper rejects the "short-term trading" hypothesis.