Price adjustment method and ex-dividend day returns in a different institutional setting

Panagiotis Asimakopoulos, Nickolaos V. Tsangarakis and Emmanuel Tsiritakis

International Review of Financial Analysis, 2015, vol. 41, issue C, 1-12

Abstract: This study investigates the determinants of the ex-dividend day price behavior in the Athens Stock Exchange (ASE), a unique institutional setting, and examines how a major regulatory change in the price adjustment method affects the extent of the ex-day stock price drop. We find that allowing the market to freely adjust prices, after 2001, the ex-dividend day price improves the pricing efficiency of the market in the sense that the raw price ratio tends to one and abnormal returns tend to zero. We also find that in the absence of taxes on dividends and capital gains and certain microstructure impediments discussed in the literature – i.e., bid-ask spread, market makers, price discreteness, tick size and limit order adjustment mechanism – stock illiquidity is the best candidate for explaining the magnitude of the ex-dividend day price adjustment.

Keywords: Ex-dividend day; Microstructure; Illiquidity; Regulation change; ASE (search for similar items in EconPapers)
JEL-codes: G14 G35 G38 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521915000873
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:41:y:2015:i:c:p:1-12

DOI: 10.1016/j.irfa.2015.05.005

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().