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
Date Written: 2020
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: Suggested Citation