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|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|11180||2013||21 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Financial Economics, Volume 109, Issue 3, September 2013, Pages 640–660
We find an asset pricing anomaly whereby companies have positive abnormal returns in months when they are predicted to issue a dividend. Abnormal returns in predicted dividend months are high relative to other companies and relative to dividend-paying companies in months without a predicted dividend, making risk-based explanations unlikely. The anomaly is as large as the value premium, but less volatile. The premium is consistent with price pressure from dividend-seeking investors. Measures of liquidity and demand for dividends are associated with larger price increases in the period before the ex-day (when there is no news about the dividend) and larger reversals afterward.
Most theoretical models used in finance assume perfect liquidity, meaning that investors can purchase or sell arbitrary amounts of a firm's securities without affecting the price. However, empirical evidence exists that demand curves for stocks slope downward. A number of papers show price changes around the inclusion of stocks in an index, a one-off event that results in a largely permanent increase in demand but arguably does not contain information (Shleifer, 1986, Wurgler and Zhuravskaya, 2002 and Greenwood, 2005, and others). But should price changes be expected for predictable and temporary shifts in demand? In such cases, arbitrageurs ought to have the best chance of reducing price impact by taking the opposite side of these trades. If predictable price patterns result from demand shifts in large, liquid companies around regularly scheduled, highly salient events, this presents a challenge for notions of market efficiency. In this paper we study the reaction of stock prices when companies are expected to issue dividends. The lead-up to dividend payment is a period when the demand and supply of shares could shift. Investors who wish to receive the dividend, for whatever reason, must purchase the stock before the ex-day. Conversely, those who do not wish to receive the dividend must sell before the ex-day. At the same time, liquidity suppliers and arbitrageurs could be expected to enter the market to offset any price impact that dividend-motivated trading is having. If dividend-seeking investors are more numerous than dividend-avoiding investors, and if arbitrageurs are unable or unwilling to supply sufficient liquidity to the market (both empirical questions), then excess demand for the shares increases the price. Consistent with the above intuition, we find evidence of mispricing of stocks whereby companies have significantly higher returns in months when they are expected to issue a dividend. We term this the dividend month premium. Instead of conditioning on the actual payment of dividends, we forecast a predicted dividend if the company paid a quarterly dividend 3, 6, 9 or 12 months ago, a semi-annual dividend 6 or 12 months ago, or an annual dividend 12 months ago. A portfolio that buys all stocks expected to issue a dividend this month earns abnormal returns of 41 basis points. Other specifications produce even higher returns. For example, a portfolio of companies that had a semi-annual dividend six months ago has a four-factor alpha of 115 basis points per month. The returns in predicted dividend months are unusually high on two dimensions: first, relative to all other companies and, second, relative to the same set of dividend-paying stocks in months when they are not expected to have a dividend. A portfolio that is long expected dividend payers and short all other companies (between companies) earns abnormal returns of 53 basis points relative to a four-factor model. Meanwhile, a portfolio that is long companies in the month of their predicted dividend and short same companies in other months (within companies) earns abnormal returns of 37 basis points. These findings make the dividend month premium unlikely to be driven by risk. In particular, the within companies portfolio exploits only the time series variation in the same set of dividend paying companies, resulting in a portfolio with virtually zero loadings on any conventional risk factors. The reason is that the portfolio is long each company with quarterly dividends for four months of the year and short the same companies (at half the weight) for eight months of the year. Hence, any fixed loadings on risk factors tend to cancel out, making systematic risk a less likely explanation. Any explanation relating to risk would need to rely on time-varying risk loadings, with companies being systematically riskier in months of expected dividend payment. We hypothesize that the dividend month premium is due to price pressure from dividend-seeking investors in the lead-up to dividend payment. Existing theories of dividends can provide some basis for this view. Theories of catering, such as in Baker and Wurgler (2004) and Li and Lie (2006), propose that investors could have an underlying demand for dividends themselves, such as for psychological or institutional reasons. A desire for dividends and a positive discount rate could cause investors to prefer to purchase dividend-paying stocks immediately before the dividend is paid rather than immediately afterward (and prefer to sell the stock after the dividend payment, not before). Price pressure around dividend payment could also arise under dividend clientele theories, whereby groups of investors desire dividend payments for reasons such as different tax treatment, a need for income streams, etc.1 Trade is likely between investors with different tax rates in the lead-up to the ex-dividend day (Michaely and Vila, 1996 and Michaely et al., 1996), and such trades could impact prices. To determine whether price pressure explains our results, we examine daily characteristic-adjusted returns within the dividend month. We find that abnormal returns are present for virtually the entire period between the announcement date and the ex-dividend date. We find abnormal returns on the actual announcement day (12 basis points), on the predicted announcement day (3 basis points) and on the ex-day (26 basis points). Most important, there are also abnormal returns of 17 basis points in the period between the announcement and ex dividend days. While previous research has highlighted the importance of returns on the ex-day, we find that these are less than half of the total abnormal returns during the dividend period. The abnormal returns in the interim period between the announcement and ex-day are consistent with price pressure due to demand for dividends but are difficult to reconcile with alternative explanations. During this time, no news is being released about the dividend, and no uncertainty exists about the dividend size. In addition, an investor who sells the share before the ex-day does not receive the dividend. Thus, holding dividend-paying shares only for the interim period results in the same tax consequences as holding any other non-dividend-paying stock for the same length of time, and these returns are not limited to investors of a particular tax treatment. As such, it is surprising from an asset pricing perspective that there should be abnormal returns. If the price increases before payment are a result of price pressure, then there ought to be an increase in selling after dividend payment that results in negative returns. Consistent with this, abnormal returns in the 40 days after the ex-dividend day are −72 basis points. This effect is large enough to offset the gains during the dividend month, reinforcing the conclusion that the main effect is a time series one and that the price increases are reversed by subsequent price decreases. We also show that the high returns before the ex-day and the subsequent reversals are larger among less liquid securities, for which changes in demand for shares ought to have a bigger effect. Less liquid securities, measured using the Amihud (2002) variable, have more positive interim returns, more positive ex-day returns, and more negative returns (i.e., larger reversals) in the 40 days after the ex-day. Interim and ex-day returns are also significantly lower when a greater length of time passes between the announcement and the ex-dividend day, and returns after the ex-day are higher (i.e., smaller reversals). This is consistent with traders having more price impact when they are forced to buy shares over a shorter period of time. Third, returns are larger for companies with higher dividend yields, consistent with dividend-seeking investors having more demand for shares that pay larger dividends. The fact that these variables predict larger price increases before the ex-day and larger reversals afterward is strong evidence of price pressure. While it is difficult to determine whether the underlying source of demand for the dividends themselves is primarily due to tax-related clientele effects or from catering effects, some evidence exists that tentatively supports the latter interpretation. In particular, we find that the dividend month premium is 15 basis points higher during recessions and is also higher during periods of high market volatility [as measured by the Chicago Board Options Exchange Volatility Index (VIX)]. If the catering demand for dividends arises from psychology, as Baker and Wurgler (2004) suggest, it could be due to a perception that dividends represent a safe, guaranteed source of revenue. If so, such demand for dividends could increase with economic uncertainty, as risk aversion is higher and the availability of alternative safe assets is reduced. However, trading from tax-related clienteles also could have a larger effect in recessions and volatile markets if aggregate liquidity is reduced, so this evidence is not conclusive. We also present evidence that the dividend month premium is driven by dividends specifically, instead of other events that coincide with dividend payment. The dividend month premium does not appear to be driven by the earnings announcement premium, as in Beaver (1968), Frazzini and Lamont (2006), and Savor and Wilson (2011). The effect is not restricted to certain calendar months of the year, and it is not driven by the seasonality of returns described in Heston and Sadka (2008). We show that the dividend month premium is not driven by news about the size of the dividend. By contrast, when companies omit dividend payments the effect is not present, consistent with the returns being driven by the dividend itself and not by other events during the month. While we are far from the first to examine the effects of dividends on asset prices, we contribute to the literature in part by exploring the impact of predictable dividend payment using modern, calendar-time asset pricing methods. The results are striking. Notwithstanding its lack of loading on risk factors, the within companies portfolio has abnormal returns as large as the value premium, but with considerably less volatility. The within companies portfolio has an annual Sharpe ratio of 0.195, higher than the small minus big (SMB), high minus low (HML) and up minus down (UMD) portfolios, with the long-only dividend month portfolio having a Sharpe ratio of 0.421. In addition, the strategy produces positive excess returns in 73 out of 83 years, with the largest negative annual return being only −4.6%. The effects are not limited to small or illiquid stocks, as dividend-paying companies tend to be larger and more visible, and the patterns in returns hold on a value weighted as well as an equal weighted basis.2 Most of the abnormal returns are from the long side of the difference portfolio, not the short side (for which costs of implementing the strategy are higher). Due to dividend payments being highly persistent, significant alphas can be obtained using dividend information lagged up to 20 years. Our findings contribute to the literature on asset pricing anomalies that finds abnormal returns around regular, predictable events.3 Our paper also contributes to the literature on the pricing of dividends. We present a result not apparent from earlier papers that examined short periods during the dividend month, namely, that abnormal returns are present during the entire dividend period, that large reversals are evident in the weeks afterward, and that both patterns appear to share a common underlying cause of investor price pressure. We also describe how dividend returns (and reversals) are significantly higher during recessions and volatile markets, both somewhat surprising facts from the perspective of standard theories of dividend payment. Our findings raise important questions as to what underlying model of investor demand for dividends is causing prices to predictably increase well in advance of the ex-day and reverse in the period afterward. Part of the challenge for such models is to explain why dividend-seeking investors do not purchase the share a few days earlier and thereby capture the abnormal returns as well as the dividend. The remainder of the paper is structured as follows. Section 2 describes the hypotheses. Section 3 discusses the data. Section 4 presents the main results of the paper, Section 5 examines alternative explanations for our findings, and Section 6 concludes.
نتیجه گیری انگلیسی
In this paper, we show a robust price pattern: Companies have predictably higher returns in months when they are expected to pay a dividend. Simple difference portfolios produce abnormal returns of 37 to 53 basis points per month relative to a four-factor model, with some specifications producing abnormal returns as high as 115 basis points per month. We argue that the effect is driven by price pressure from dividend-seeking investors in the lead-up to the ex-day. Consistent with this explanation, substantial returns are evident in the interim period between announcement and ex-day (around 31% of the total returns of the dividend period), and significant reversals are seen in the 40 days after the ex-dividend day. We argue that price pressure from dividend-seeking investors is consistent with models of dividend clienteles (such as tax-related trading) and dividend catering. But our results pose a puzzle: Why do dividend-seeking investors, regardless of underlying motivation, not purchase the stock slightly earlier, securing both the dividend and the abnormal returns? Given that the median duration between the dividend announcement and the ex-day is only ten days, and those days contain substantial abnormal returns, it is not clear why investors who planned on buying before the ex-day do not buy the share a few days earlier. This question is challenging, both from the perspective of investor rationality and models of dividend payment, and one for which we do not have a clear answer. Our results also have implications for corporate finance. Models such as Brennan (1970) and Green and Hollifield (2003) argue that if the marginal investor pays personal taxes, and the present value of the tax liability is incorporated in equity prices, then dividends raise the firm's cost of capital. The conclusion from these models is altered, however, if taxable investors can costlessly avoid receiving the dividend by selling the share to tax-free investors before the ex-day in exchange for full value. The evidence in this paper is consistent with the existence of frictions in the trades occurring before the ex-day (which are required for investors to transfer the taxable dividends). In other words, these trades do not appear to be costless, but instead involve a leakage of value. Stock returns during dividend months represent a substantial asset pricing anomaly. The dividend month premium is as large as the value premium, but with less volatility. It survives a wide battery of control variables. It holds on both a value weighted and equal weighted basis. It is driven mainly by the long side of the portfolio. It is highly persistent, and abnormal returns are available sorting on 20-year-old data. Because of its operation within a given set of companies, it appears unlikely to be driven by risk. These facts do not seem to be broadly appreciated in the literature that examines dividends and stock returns as a way of understanding why firms pay dividends in the first place. Our results appear at odds with market efficiency and suggest that prices are not fully incorporating information about the predictable component of dividend payments.