The Role of Dividends in Equity Markets: Evidence from Sectoral-Level Analysis

The International Journal of Business and Finance Research, v. 14 (1), p. 23-34, 2020

12 Pages Posted: 14 Feb 2020

See all articles by Doh-Khul Kim

Doh-Khul Kim

North Central College

Najrin Khanom

affiliation not provided to SSRN

Date Written: 2020

Abstract

The purpose of this research is to identify how dividend payments affect the U.S. equity market at the sectoral level. A conventional stock valuation model predicts a positive response of equity price to higher dividend payment. Higher dividends convey confidence about the firm’s future to the general investors, which is supported by the signaling hypothesis. Using representative exchange traded funds for 11 sectors in the U.S. along with traditional OLS and panel regression analysis, this paper shows that the stock valuation model is generally confirmed. Eight sectors show positive impacts of dividends with statistical significance found in three sectors; Consumer Staples, Utilities, and Real Estate.

Keywords: Dividend Payment, Sectoral-level ETF, Equity Market Response

JEL Classification: G10, G12

Suggested Citation

Kim, Doh-Khul and Khanom, Najrin, The Role of Dividends in Equity Markets: Evidence from Sectoral-Level Analysis (2020). The International Journal of Business and Finance Research, v. 14 (1), p. 23-34, 2020. Available at SSRN: https://ssrn.com/abstract=3522529

Doh-Khul Kim (Contact Author)

North Central College ( email )

Najrin Khanom

affiliation not provided to SSRN

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