A microstructure analysis of ex-dividend stock price behavior before and after the 1984 and 1986 Tax Reform Acts
Ex-dividend research is extended by explicitly modeling trading at bid and ask quotations. This refinement distinguishes between buying and selling for long-term investors and short-term dividend capture traders. It also explicitly incorporates the bid ask spread and eliminates some potential measur...
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Published in | The Journal of business (Chicago, Ill.) Vol. 69; no. 3; p. 313 |
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Main Author | |
Format | Journal Article |
Language | English |
Published |
Chicago
University of Chicago, acting through its Press
01.07.1996
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Subjects | |
Online Access | Get full text |
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Summary: | Ex-dividend research is extended by explicitly modeling trading at bid and ask quotations. This refinement distinguishes between buying and selling for long-term investors and short-term dividend capture traders. It also explicitly incorporates the bid ask spread and eliminates some potential measurement errors that may bias returns. Marginal conditions are tested during 1983 and 1988, periods that span the 1984 and 1986 Tax Reform Acts. Results for long-term investors are consistent with the elimination of favorable capital tax gains. At observed prices, tax-neutral short-term traders cannot profit. Corporate dividend capture traders face profit opportunities during 1983 that disappear by 1988. |
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ISSN: | 0021-9398 1537-5374 |
DOI: | 10.1086/209693 |