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Price adjustment method and ex-dividend day returns in a different institutional setting

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journal contribution
posted on 28.09.2017, 08:23 by Panagiotis Asimakopoulos, Nickolaos V. Tsangarakis, Emmanuel D. Tsiritakis
This study investigates the determinants of the ex-dividend day price behavior in the Athens Stock Exchange (ASE), a unique institutional setting, and examines how a major regulatory change in the price adjustment method affects the extent of the ex-day stock price drop. We find that allowing the market to freely adjust prices, after 2001, the ex-dividend day price improves the pricing efficiency of the market in the sense that the raw price ratio tends to one and abnormal returns tend to zero. We also find that in the absence of taxes on dividends and capital gains and certain microstructure impediments discussed in the literature - i.e., bid-ask spread, market makers, price discreteness, tick size and limit order adjustment mechanism - stock illiquidity is the best candidate for explaining the magnitude of the ex-dividend day price adjustment.

History

School

  • Business and Economics

Department

  • Business

Published in

International Review of Financial Analysis

Volume

41

Pages

1 - 12

Citation

ASIMAKOPOULOS, P.N., TSANGARAKIS, N.V. and TSIRITAKIS, E.D., 2015. Price adjustment method and ex-dividend day returns in a different institutional setting. International Review of Financial Analysis, 41, October 2015, pp. 1 - 12.

Publisher

© Elsevier Inc.

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Acceptance date

13/05/2015

Publication date

2015

Notes

This article was published in the International Review of Financial Analysis [© Elsevier Inc.] and the definitive version is available at: http://dx.doi.org/10.1016/j.irfa.2015.05.005

ISSN

1057-5219

Language

en

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