Selectivity and Sample Bias in Dividend Drop-Off Studies

26 Pages Posted: 29 Nov 2010

See all articles by Michael D. McKenzie

Michael D. McKenzie

The University of Sydney - Discipline of Finance; University of Cambridge - Cambridge Endowment for Research in Finance (CERF); Financial Research Network (FIRN)

Graham Partington

University of Sydney - School of Business - Finance Discipline; Financial Research Network (FIRN)

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

McKenzie, Michael David and Partington, Graham, Selectivity and Sample Bias in Dividend Drop-Off Studies (November 28, 2010). Finance and Corporate Governance Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1716576 or http://dx.doi.org/10.2139/ssrn.1716576

Michael David McKenzie (Contact Author)

The University of Sydney - Discipline of Finance ( email )

Level 2 9 Castlereagh Street
Sydney, NSW 2000
Australia
+61 2 9114 0578 (Phone)
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University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Graham Partington

University of Sydney - School of Business - Finance Discipline ( email )

Building H69
Sydney NSW, 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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