Finance Working Papers, Department of Business Studies, Aarhus School of Business, University of Aarhus
No 02-12:
Testing for Multiple Types of Marginal Investor in Ex-day Pricing
Jan Bartholdy ()
and Kate Briown ()
Abstract: The observed changes in share prices at the ex-dividend
day have led researchers to look for a single marginal investor type,
either a long or a short term trader, to explain the particular patterns in
returns in different markets - dominating equilibrium. This paper provides
a model which extends this research in three directions. One, it allows for
the possibility that different types of traders may influence different
stocks thereby generating a separating equilibrium. Two, it identifies an
additional marginal investor who has the option of being taxed as a short
term or long term trader. Three, it explicitly models the fact that it can
take can be a considerable time lag from the time a dividend based trade is
made until taxes have to be paid on that trade. A unique data set from New
Zealand is used for the empirical analysis. Evidence of a separating
equilibrium with at least two types of marginal investors is found
Keywords: Dividends; taxes; ex-day pricing; (follow links to similar papers)
35 pages, June 2, 2002
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