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Stock-Market Behavior on Ex-Dates: New Insights from German Stocks with Tax-Free Dividend

Finance and Banking, Friedrich-Alexander-Universität Erlangen-Nürnberg, 90403 Nürnberg, Germany
Int. J. Financial Stud. 2020, 8(3), 58; https://doi.org/10.3390/ijfs8030058
Received: 7 September 2020 / Accepted: 16 September 2020 / Published: 21 September 2020
We examine stock prices and the number of stocks traded around ex-dividend dates of German stocks with tax-free dividend. Tax-free dividends are temporarily tax-exempt, as they reduce the initial purchasing price of a stock. With our analysis of this particular group of German stocks, we can make clear predictions regarding ex-date prices and analyze the number of stocks traded around ex-dates, doing so without the systematic bias of cum-ex trades over time. For XETRA, our empirical results indicate that ex-date prices decline, on average, by the amount of the dividend. We do not find a significant relationship between a stock’s price-drop ratio and dividend yield. Further, the empirical analysis suggests that there is no significant correlation between an abnormal number of a stock being traded and its dividend yield. These results are most consistent with tax-motivated reasoning. However, our volume analysis reveals no consistency regarding the abnormal number of stocks traded for multilateral trading facilities. View Full-Text
Keywords: dividend; ex-dividend date; price-drop ratio; abnormal return; abnormal volume; dividend taxation; payout policy dividend; ex-dividend date; price-drop ratio; abnormal return; abnormal volume; dividend taxation; payout policy
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MDPI and ACS Style

Kreidl, F. Stock-Market Behavior on Ex-Dates: New Insights from German Stocks with Tax-Free Dividend. Int. J. Financial Stud. 2020, 8, 58. https://doi.org/10.3390/ijfs8030058

AMA Style

Kreidl F. Stock-Market Behavior on Ex-Dates: New Insights from German Stocks with Tax-Free Dividend. International Journal of Financial Studies. 2020; 8(3):58. https://doi.org/10.3390/ijfs8030058

Chicago/Turabian Style

Kreidl, Felix. 2020. "Stock-Market Behavior on Ex-Dates: New Insights from German Stocks with Tax-Free Dividend" International Journal of Financial Studies 8, no. 3: 58. https://doi.org/10.3390/ijfs8030058

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