The ‘Ex-Dividend Day’ Anomaly Under a Behavioral Dividend Clientele View: Evidence From China

39 Pages Posted: 21 Jul 2020 Last revised: 22 Jul 2020

See all articles by Huancheng Du

Huancheng Du

Central University of Finance and Economics

Xiaoran Ni

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE); Xiamen University - School of Economics

Jinfan Zhang

Chinese University of Hong Kong (Shenzhen)

Date Written: June 28, 2020

Abstract

We propose a behavioral dividend clientele view to explain a unique “ex-dividend day” anomaly on the Chinese stock market. In particular, we find that on the ex-dividend day, the average CAPM-adjusted stock return is significantly below zero and the average trading volume significantly shrinks, which are different from the theoretical predictions and existing findings drawn from other stock markets. Such patterns tend to be driven by small retail investors who are net buyers of dividend paying stocks prior to the ex-dividend day and switch to net sellers of on and after the ex-dividend day. Furthermore, we find “dividend price”, the negative deviations of ex-dividend day stock return from zero, is positively associated with dividend yields and the idiosyncratic risks of the underlying stocks. These findings suggest that investors with strong non-monetary and psychologically driven dividend preferences can result in a unique “ex-dividend day” anomaly.

Keywords: Ex-dividend day, cash dividend, dividend price, behavioral dividend clientele

JEL Classification: G10, G12, G40

Suggested Citation

Du, Huancheng and Ni, Xiaoran and Zhang, Jinfan, The ‘Ex-Dividend Day’ Anomaly Under a Behavioral Dividend Clientele View: Evidence From China (June 28, 2020). Available at SSRN: https://ssrn.com/abstract=3637553 or http://dx.doi.org/10.2139/ssrn.3637553

Huancheng Du (Contact Author)

Central University of Finance and Economics ( email )

School of Finance, Changping University Park
Beijing, 102206
China

Xiaoran Ni

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

D 204, Economics Building
Xiamen, Fujian 361005
China

Xiamen University - School of Economics ( email )

China

Jinfan Zhang

Chinese University of Hong Kong (Shenzhen) ( email )

Shenzhen
China

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