Testing for Multiple Types of Marginal Investor in Ex-day Pricing

Jan Bartholdy () and Kate Briown ()
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Kate Briown: University of Otago, Postal: Department of Finance & Quantitative Analysis, P.O. Box 56, Dunedin, New Zealand,

No 02-12, Finance Working Papers from University of Aarhus, Aarhus School of Business, Department of Business Studies

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 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: Written 2002-06-02
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