The Clientele Effect in the Brazilian Market: Are Investors Irrational?

Jairo Laser Procianoy () and Rodrigo dos Santos Verdi ()
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Jairo Laser Procianoy: EA/UFRGS
Rodrigo dos Santos Verdi: The Wharton School, University of Pennsilvanya

Brazilian Review of Finance, 2003, vol. 1, issue 2, 217-242

Abstract: This work tests the dividend clientele effect in the Brazilian stock market between 1989 and 1993, a period during which there no dividends taxes varied between zero and 25% according to shareholders group. From a sample of 693 events studied, 47% showed first ex-dividend day stock price higher than in the previous day. These findings were against theoretical predictions and investors attitudes may be considered irrational because they were paying more for ex-dividend shares than for cum-dividend ones. Sample segmentation by year showed no difference. Financial institutions and first group stock yield had lower abnormal returns than other. Positive abnormal returns of 1,4% in the first ex-dividend day was found, 0,1% significant. Five days abnormal returns following last cum-dividends day study showed that stock prices increased and returned to the original price few days later.

Keywords: dividends; taxes; clientele effect; Brazil (search for similar items in EconPapers)
JEL-codes: G35 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:1:y:2003:i:2:p:217-242

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