Stock Market Reactions to Dividend Announcements: Empirical Evidence from the Austrian Stock Market

Financial Markets and Portfolio Management, Vol. 17, No. 3, pp. 332-350, 2003

Posted: 12 Sep 2005

Abstract

This study investigates the effects of dividend announcements on stock prices and trading volume in the Austrian stock market. Abnormal returns are established as the difference between actual returns and expected returns generated by the Market Model. We use the model of expected dividends such that any change in the announced dividend-stream is unanticipated. Our results provide evidence that announced dividend changes bring new information to the market and that stock prices move in the same direction as dividends. In addition, we find that stock prices react rather quickly to the new information. We also report an increase in stock return volatility in the cases of announced constant dividends and dividend decreases, indicating a heterogeneous interpretation of the signal at the individual level. Finally we find that trading volume on average shows a significant increase around the announcement date, supporting the hypothesis that dividend changes in either direction induce investors to revise their portfolios.

JEL Classification: G0, G1

Suggested Citation

Schleicher, Christoph and Gurgul, Henryk and Mestel, Roland, Stock Market Reactions to Dividend Announcements: Empirical Evidence from the Austrian Stock Market. Financial Markets and Portfolio Management, Vol. 17, No. 3, pp. 332-350, 2003, Available at SSRN: https://ssrn.com/abstract=798204

Christoph Schleicher (Contact Author)

Bank of England ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom
+44 0207 601 4115 (Phone)
+44 0207 601 5953 (Fax)

Henryk Gurgul

Independent ( email )

Roland Mestel

University of Graz ( email )

Institute of Banking and Finance
Universitaetsstrasse 15/F2
A-8010 Graz
Austria
+43 316 380 7304 (Phone)
+43 316 380 9580 (Fax)

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