Predictable Price Pressure

58 Pages Posted: 26 May 2021 Last revised: 30 Jun 2022

See all articles by Samuel M. Hartzmark

Samuel M. Hartzmark

University of Chicago - Booth School of Business

David H. Solomon

Boston College - Carroll School of Management

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 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

Hartzmark, Samuel M. and Solomon, David H., Predictable Price Pressure (May 25, 2021). Available at SSRN: https://ssrn.com/abstract=3853096 or http://dx.doi.org/10.2139/ssrn.3853096

Samuel M. Hartzmark (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

David H. Solomon

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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