Predictable Price Pressure
58 Pages Posted: 26 May 2021 Last revised: 30 Jun 2022
Date Written: May 25, 2021
We demonstrate that predictable uninformed cash flows forecast market and individual stock returns. Buying pressure from dividend payments (announced weeks prior) predicts higher value-weighted market returns, with the top quintile of payment days four times higher than the lowest. This effect holds internationally, varies with reinvestment intensity, and increases with high VIX. High stock expense firms have lower returns from selling pressure when blackout periods lift, by 117 b.p. in four days. We estimate market-level price multipliers of 1.5 to 2.3. These results suggest price pressure is a widespread result of flows, rather than an anomaly.
Keywords: Price Pressure, dividends, asset pricing, market returns, predictable returns
JEL Classification: G02, G12
Suggested Citation: Suggested Citation