Selectivity and Sample Bias in Dividend Drop-Off Studies
26 Pages Posted: 29 Nov 2010
Date Written: November 28, 2010
Abstract
A large literature exists which focuses on estimating the dividend drop off ratio around company ex-dates. This paper focuses on issues relating to sample selection and how this impacts on the drop off estimate. Specifically issues around the impact of the market adjustment, thin trading, the size of the spread and tick relative to the dividend and dividend event day clustering are considered. Our results highlight that the drop off ratio is extremely sensitive to small changes in sample such that rather than focus on deriving a point estimate of the drop off ratio, it may be more sensible to talk in terms of a feasible range.
Keywords: Dividend Drop Off, Ex-Dividend, Sample Selection
JEL Classification: G10
Suggested Citation: Suggested Citation