Reits, Decimalization, and Ex-Dividend Stock Prices

Posted: 11 Jan 2007

See all articles by William G. Hardin III

William G. Hardin III

Mississippi State University - Department of Finance and Economics

Kartono Liano

Mississippi State University - Department of Finance and Economics

Gow-Cheng Huang

Alabama State University - Department of Accounting and Finance

Gregory Leo Nagel

Middle Tennessee State University

Abstract

The ex-dividend pricing of real estate investment trust (REIT) stocks under fractional and decimal pricing regimes is investigated. For REITS, with the move from discrete to decimal pricing, the price drop on the ex-dividend day approaches the dividend amount, the ex-date abnormal return decreases, the spread-to-dividend ratio declines, abnormal trading volume increases, and the potential erroneous appearance of a tax-clientele effect is diminished. Discreteness and other transaction costs are reduced with decimalization implying that part of the persistence in the appearance of the tax-clientele effect when modeling ex-dividend stock pricing might be generated by the interaction between transaction costs, dividend amount, and yield.

Keywords: REIT, decimalization, ex-dividend, tax-clientele, market microstructure

JEL Classification: G12, G35, H24

Suggested Citation

Hardin, William and Liano, Kartono and Huang, Gow-Cheng and Nagel, Gregory Leo, Reits, Decimalization, and Ex-Dividend Stock Prices. Journal of Real Estate Finance and Economics, Vol. 34, No. 4, 2007. Available at SSRN: https://ssrn.com/abstract=956159

William Hardin (Contact Author)

Mississippi State University - Department of Finance and Economics ( email )

P.O. Box 9580
Mississippi State, MS 39762
United States
601-325-7478 (Phone)
601-325-1977 (Fax)

Kartono Liano

Mississippi State University - Department of Finance and Economics ( email )

P.O. Box 9580
Mississippi State, MS 39762
United States
601-325-1981 (Phone)
601-325-1977 (Fax)

Gow-Cheng Huang

Alabama State University - Department of Accounting and Finance ( email )

P.O. Box 271
Montgomery, AL 36101-0271
United States
334-229-6920 (Phone)
334-265-0914 (Fax)

Gregory Leo Nagel

Middle Tennessee State University ( email )

P.O. Box 50
Murfreesboro, TN 37132
United States

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