Preference for Dividends and Return Comovement

52 Pages Posted: 16 Feb 2015 Last revised: 22 Apr 2018

See all articles by Allaudeen Hameed

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance

Jing Xie

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: February 12, 2018

Abstract

Stocks that initiate dividends tend to comove more with other dividend-paying stocks and comove less with non-dividend payers. This is also true for: (a) dividend initiations that are motivated by the exogenous 2003 dividend tax cut; and (b) the cash dividend share class of Citizens Utilities (relative to its stock dividend class). We find that flows to dividend prone (averse) mutual funds increases the comovement among dividend-paying (non-dividend paying) stocks. Overall, the evidence supports the proposition that the trading of pro-dividend (dividend-averse) clienteles induces an extra factor in dividend payers (non-payers), beyond those associated with changes in common factors.

Keywords: Dividend Clientele, Return Comovement, Style Investing

JEL Classification: G12, G35, H20

Suggested Citation

Hameed, Allaudeen and Xie, Jing, Preference for Dividends and Return Comovement (February 12, 2018). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2565277 or http://dx.doi.org/10.2139/ssrn.2565277

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu.sg/faculty-details/?profId=1

Jing Xie (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

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