DIVIDENDS AND UNCERTAINTY: EVIDENCE FROM THE ITALIAN MARKET

Anna Battauz () and Francesca Beccacece ()
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Anna Battauz: Istituto di Metodi Quantitativi, Università Bocconi, V.le Isonzo 25, 20135 Milano, Italia
Francesca Beccacece: Istituto di Metodi Quantitativi, Università Bocconi, V.le Isonzo 25, 20135 Milano, Italia

International Journal of Theoretical and Applied Finance (IJTAF), 2004, vol. 07, issue 01, 45-62

Abstract: In this paper we investigate the behavior of the market around dividend payment dates. Our empirical analysis, based on a Bayesian approach applied to Italian stock data, confirms the presence of abnormal returns at the ex-dividend date, as already documented in the literature for other markets. Calibrating a suitable model introduced in [1] to take care of the additional randomness pertubing the market around dividend payment dates, we investigate the effects on the derivative evaluation. Looking at the NoArbitrage prices of American call options written on some Italian dividend-paying stock and comparing them with the marketed prices, we conclude that the effect of this additional randomness can be neglected.

Keywords: No arbitrage; discrete dividends; stochastic jumps; Bayesian analysis (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219024904002323

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