THE ROLE OF DIVIDENDS IN EQUITY MARKETS: EVIDENCE FROM SECTORAL-LEVEL ANALYSIS

Doh-Khul Kim and Najrin Khanom

The International Journal of Business and Finance Research, 2020, vol. 14, issue 1, 23-34

Abstract: The purpose of this research is to identify how dividend payments affect the U.S. equity market at the sectoral level. A conventional stock valuation model predicts a positive response of equity price to higher dividend payment. Higher dividends convey confidence about the firm’s future to the general investors, which is supported by the signaling hypothesis. Using representative exchange traded funds for 11 sectors in the U.S. along with traditional OLS and panel regression analysis, this paper shows that the stock valuation model is generally confirmed. Eight sectors show positive impacts of dividends with statistical significance found in three sectors; Consumer Staples, Utilities, and Real Estate

Keywords: Dividend Payment; Sectoral-level ETF; Equity Market Response (search for similar items in EconPapers)
JEL-codes: G10 G12 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:14:y:2020:i:1:p:23-34

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