The Dividend Month Premium
55 Pages Posted: 19 Sep 2011 Last revised: 28 Jun 2014
Date Written: October 1, 2012
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.
Keywords: Dividends, Mispricing, Market Efficiency, Price Pressure, Return Predictability
JEL Classification: G12, G14, G35
Suggested Citation: Suggested Citation