Study On The Relationship Among Stock Return Volatility, Dividend Policy And Financial Performance

Stock return volatility is always the core issue of research on portfolio, asset pricing and risk management, concern by investors and regulators, and the factors that affect stock return volatility are academic research focus.This article conducts an empirical analysis of the relationship among stock return volatility, dividend policy and financial performance, using dividend yield and payout ratio representing dividend policy, reflecting the financial performance from five aspects of profitability, solvency, growth capacity, operating capacity and capital expansion capacity, and controlling firm size, ownership concentration, the proportion of tradable shares, book market ratio and turnover rate, with a sample of A-shares from Shanghai and Shenzhen Stock Exchange in 2013 and 2014. The results show that there is a significant negative relationship between stock return volatility and dividend yield, but no significant relationship between stock return volatility and dividend payout ratio. That means increasing dividend yield can reduce stock return volatility, but changing dividend payout ratio doesn’t have a significant influence on stock return volatility. For companies with dividends, the relationship between stock return volatility and financial performance is significant; but for companies without dividends, the relationship between stock return volatility and financial performance is weak. That means compared with companies without dividends, the investors pay more attention to fundamentals information for companies with dividends.Comparing the regression results of sub samples from 2013 and 2014, the behavior of investors in 2013 is more radical than in 2014, and the return volatility in 2013 is higher. The goodness of fit in sub samples from 2013 is higher, and it means that stock return volatility is explained more fully. Beyond the variables listed in this article, the factors that affect stock return volatility are less than 2014.The innovations of this article can be summarized as following:1) This article researches the relationship between stock return volatility and each of profitability, solvency, growth capacity, operating capacity and capital expansion capacity, which can reflect the relationship between stock return volatility and fundamental information more fully.2) Single indicator is not enough to reflect one aspect of fundamental information, but it’s hard to avoid multicollinearity if joining other indicators in the regression equation. This article selects two or more indicators for each of profitability, solvency, growth capacity, operating capacity and capital expansion capacity, using the method of factor analysis, reflect fundamental information in factor score, which can more fully reflect fundamental information of listed companies and avoid the problem of multicollinearity.3) This article both researches Shanghai A shares and Shenzhen A shares, which can reflect the similarities and differences between two markets.4) This article both researches data from 2013 and 2014, which can reflect similarities and differences between stock markets in different time.