Predictable Price Pressure
62 Pages Posted: 26 May 2021 Last revised: 18 Nov 2022
Date Written: May 25, 2021
Abstract 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 returns for the top quintile of payment days four times higher than the lowest. This holds internationally, and increases when reinvestment is high and market liquidity is low. High stock expense firms have lower returns from selling pressure after blackout periods, 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, not an anomaly.
Keywords: Price Pressure, dividends, asset pricing, market returns, predictable returns
JEL Classification: G02, G12
Suggested Citation: Suggested Citation