Who Wants to Trade Around Ex-Dividend Days?
44 Pages Posted: 12 Mar 2005
Date Written: October 2004
Abstract
This paper examines order flows around ex-dividend dates on the Taiwan Stock Exchange. Not only does Taiwan's tax code allow us to separate the tax hypothesis from other explanations, but Taiwan's data also permits us to examine the heterogeneity of investors' behavior around ex-dividend dates. We find that, different types of investors show entirely different patterns of order flows. For both taxable and non-taxable samples, small investors sell before the ex-date and start to buy from the ex-date, which suggests that small investors prefer low-priced stocks. We find weaker evidence consistent with the tax hypothesis: foreigners and large domestic investors who are tax-disadvantaged avoid participating in taxable dividends. We also find strong evidence that tax-neutral institutions play the role of short-term arbitrageurs around ex-dividend dates.
Keywords: Ex-date, stock dividend, tax, noise, order imbalance
JEL Classification: G14, G15, G30, G35
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By John R. Graham, Roni Michaely, ...
-
New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor
By Leonie Bell and Tim Jenkinson
-
By Roger H. Gordon and David F. Bradford
-
The Effective Tax Rate and the Pretax Rate of Return
By Martin S. Feldstein, James M. Poterba, ...
-
Taxes and Ex-Day Returns: Evidence from UK and Continental Europe
-
Taxation and the Ex-Dividend Day Behavior of Common Stock Prices
By Jerry Green
-
Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior - Thirty-Two Years Later
By Edwin J. Elton, Martin J. Gruber, ...
-
Marginal Stockholder Tax Effects and Ex-Dividend Day Behavior-Thirty-Two Years Later
By Edwin J. Elton, Martin J. Gruber, ...