Dividend Suspensions and Cash Flows During the COVID-19 Pandemic: A Dynamic Econometric Model

55 Pages Posted: 24 Sep 2020 Last revised: 13 May 2022

See all articles by Davide Pettenuzzo

Davide Pettenuzzo

Brandeis University - International Business School

Riccardo Sabbatucci

Stockholm School of Economics; Swedish House of Finance

Allan Timmermann

University of California, San Diego (UCSD) - Rady School of Management

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Date Written: December 28, 2020

Abstract

Firms suspended dividend payments in unprecedented numbers in response to the outbreak of the Covid-19 pandemic. We develop a multivariate dynamic econometric model that allows dividend suspensions to affect the conditional mean, volatility, and jump probability of growth in daily industry-level dividends and demonstrate how the parameters of this model can be estimated using Bayesian Gibbs sampling methods. We find considerable heterogeneity across industries in the dynamics of daily dividend growth and the impact of dividend suspensions.

Keywords: COVID-19; high-frequency cash flows; dividend suspensions; predictive density modeling, Bayesian estimation

JEL Classification: C5, C11, G35

Suggested Citation

Pettenuzzo, Davide and Sabbatucci, Riccardo and Timmermann, Allan, Dividend Suspensions and Cash Flows During the COVID-19 Pandemic: A Dynamic Econometric Model (December 28, 2020). Swedish House of Finance Research Paper No. 20-18, Available at SSRN: https://ssrn.com/abstract=3628608 or http://dx.doi.org/10.2139/ssrn.3628608

Davide Pettenuzzo

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

Riccardo Sabbatucci (Contact Author)

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Swedish House of Finance

Drottninggatan 98
111 60 Stockholm
Sweden

Allan Timmermann

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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