Option Implied Dividends

Working paper

58 Pages Posted: 6 Jun 2017 Last revised: 11 Jul 2018

See all articles by Jac Kragt

Jac Kragt

Tilburg University - Department of Finance

Date Written: June 2, 2017


This is the first paper to calculate and analyze option-implied dividends for individual US companies, while accounting for the early exercise premium. These firm-level implied dividends show substantial variation relative to actual dividends over time as well as in the cross-section. Implied dividends predict actual dividends, particularly upward dividend changes. Stock prices correlate strongly with changes in implied dividends, so much so that price changes are partly reversed subsequently. An announcement to cut dividends causes a stock's price to drop by 2.6% on average, but if it is correctly predicted by implied dividends the response is negligible.

Keywords: Dividends, Options, Dividend Forecasting, Stock Price Response to Dividend Announcements

JEL Classification: G12, G13

Suggested Citation

Kragt, Jac, Option Implied Dividends (June 2, 2017). Working paper, Available at SSRN: https://ssrn.com/abstract=2980275 or http://dx.doi.org/10.2139/ssrn.2980275

Jac Kragt (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE

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