The Ex-Day Price Behavior of REITs: Taxes or Ticks?

28 Pages Posted: 18 May 2005 Last revised: 13 Aug 2009

See all articles by Jeff Whitworth

Jeff Whitworth

University of Houston, Clear Lake

David Carter

Oklahoma State University - Stillwater - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: February 16, 2008

Abstract

Taxes and microstructure constraints are often cited as possible explanations for why stock prices drop by less than the dividend on their ex-dates. Using a sample of REITs, which have no significant correlation between dividend size and yield, we find that close-to-open ex-dividend price drops are related to dividend size as suggested by the microstructure models, but close-to-close price drops are related to dividend yield as predicted by the tax theory. These results imply that overnight price drops are primarily determined by microstructure, but that trading during the ex-day causes prices to adjust to reflect individual tax preferences.

Keywords: Dividends, ex-day price behavior, REITs, discreteness, tax clienteles

JEL Classification: G0, G12, G14, G35

Suggested Citation

Whitworth, Jeff and Carter, David A., The Ex-Day Price Behavior of REITs: Taxes or Ticks? (February 16, 2008). Available at SSRN: https://ssrn.com/abstract=722618 or http://dx.doi.org/10.2139/ssrn.722618

Jeff Whitworth (Contact Author)

University of Houston, Clear Lake ( email )

2700 Bay Area Blvd.
Houston, TX 77058
United States
281-283-3218 (Phone)

David A. Carter

Oklahoma State University - Stillwater - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-5104 (Phone)
405-744-5180 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
216
Abstract Views
1,496
rank
158,030
PlumX Metrics