The Investment Strategy Design Based On High Stock Dividend

It would be regarded as a piece of good news when listed companies issue stock dividend,especially for high stock dividend in China.According to theory,both capital reserves turn to equity and issue new share would not have influence on the cash flow or shareholders' treasure,thus the event of high stock dividend is just an adjustment of the account of owner's equity and would not improve the intrinsic value.However,investors seem to have much more interest in the event of high stock dividend.In reality,Chinese investors are urged to speculate in some event because of collective non-rationality.Based on the event of high stock dividend,this paper will design an investment strategy which contains the method to select stocks and constructs portfolio to gain excess return.It could be divided into three stages when discussing the event of high stock dividend.The first stage is based on expectation,the second stage is about contending for the dividend and the last stage is about covering the price gap.The main stages that would be used in the strategy are the first and third ones when considered the characteristics and operability.Two dimension measurement could help to find out high dividend stocks,which are companies own ability to issue high dividend(unit share capital surplus,undistributed profit per share,EPS,cash flow,net asset and operating revenue)and willing to issue high dividend(stock price,capitalization,time to market and lifted shares).It has been discovered that the basic factors,capitalization,stock price,time to market and cash flow could improve the probability to forecast high dividend stock after studying the data from 2011 to 2015 by using statistic method.And then,using logit regression could calculate the probability that the companies would issue high stock dividend of each stocks,it could be used to construct portfolio by choosing the top 20 stocks.What is more,applying event study to research on the third stage find that poor performance stocks would have excess profit when publish high dividend announcement in 20 trading days.Based on these analysis,the complete high stock dividend investment strategy experience a great out sample performance during 2012 to 2016.The investment strategy may help investors to gain excess return.