The Dividend Month Premium
Samuel M. Hartzmark
University of Chicago - Booth School of Business
David H. Solomon
University of Southern California - Marshall School of Business
October 1, 2012
Journal of Financial Economics (JFE), Vol. 109, No. 3, 2013
We document an asset-pricing anomaly whereby companies have positive abnormal returns in months when a dividend is predicted. Abnormal returns in predicted dividend months are high relative to other companies, and relative to dividend-paying companies in months without a predicted dividend, making risk-based explanations unlikely. The anomaly is as large as the value premium, but less volatile. The premium is consistent with price pressure from dividend-seeking investors. Measures of liquidity and demand for dividends are associated with larger price increases in the period before the ex-day (when there is no news about the dividend), and larger reversals afterwards.
Number of Pages in PDF File: 55
Keywords: Dividends, Mispricing, Market Efficiency, Price Pressure, Return Predictability
JEL Classification: G12, G14, G35
Date posted: September 19, 2011 ; Last revised: June 28, 2014
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