Institutional Trading Around the Ex-Dividend Day
Posted: 4 May 2016
There are 2 versions of this paper
Institutional Trading Around the Ex-Dividend Day
Date Written: May 1, 2016
Abstract
This study uses the trading records of institutional equity funds to examine their ex-dividend trading behaviour. We argue that trading is influenced by the tax incentives facing the fund, the characteristics of individual stocks and by changes in tax legislation. In aggregate, institutions trade to avoid the dividend and franking credit. Changes in tax incentives and the fund’s tax status also affect ex-dividend day trading, with unit trusts dominating the dividend avoidance trades. The results indicate that taxes, transactions costs and the cum-dividend price run-up influence the trading of institutional investors around the ex-dividend day.
Keywords: Capital Gains Tax, Dividends, Ex-Dividend Day, Institutional Trading, Tax Credits
Suggested Citation: Suggested Citation
Kingsley Y. L. Fong
University of New South Wales - School of Banking and Finance ( email )
UNSW Business School
High St
Sydney, NSW 2052
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au