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Price adjustment method and ex-dividend day returns in a different institutional setting
journal contribution
posted on 2017-09-28, 08:23 authored by Panagiotis Asimakopoulos, Nickolaos V. Tsangarakis, Emmanuel D. TsiritakisThis 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 AnalysisVolume
41Pages
1 - 12Citation
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
2015-05-13Publication date
2015Notes
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.2015.05.005ISSN
1057-5219Publisher version
Language
- en