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Publications
Publications
  • 1980
  • Working Paper

Taxation and the Ex-dividend Day Behavior of Common Stock Prices

By: Jerry R. Green
  • Format:Print
  • | Language:English
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Abstract

The behavior of stock prices around ex-dividend days has been suggested as evidence for tax-induced clientele effects and as a means to estimate the average effective tax rate faced by investors. In this paper these possibilities are examined theoretically and empirically. Theoretically it is shown that the measured price drop per dollar of dividend may provide a biased estimate of the effective tax rate. Looking at the volume of trade around ex-dividend days we show that the conditions under which it would be unbiased are unlikely to hold. Strong evidence, based on a broader data base than that used by previous investigators, is presented for the presence of the clientele effect.

Keywords

Taxation; Stocks; Price

Citation

Green, Jerry R. "Taxation and the Ex-dividend Day Behavior of Common Stock Prices." NBER Working Paper Series, No. 496, July 1980.
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About The Author

Jerry R. Green

Negotiation, Organizations & Markets
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More from the Author
  • Two Representations of Information Structures and Their Comparisons By: Jerry R. Green and Nancy L. Stokey
  • Assent-maximizing Social Choice By: Katherine A. Baldiga and Jerry R. Green
  • Let the Right One In: A Microeconomic Approach to Partner Choice in Mutualisms By: Marco Archetti, Francisco Ubeda, Drew Fudenberg, Jerry R. Green, Naomi E. Pierce and Douglas W. Yu
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