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Preference for dividends and return comovement

Allaudeen Hameed and Jing Xie

Journal of Financial Economics, 2019, vol. 132, issue 1, 103-125

Abstract: Stocks that initiate dividends tend to comove more with other dividend-paying stocks and comove less with non-dividend payers. This is also true for: (a) dividend initiations that are motivated by the exogenous 2003 dividend tax cut; and (b) the cash dividend share class of Citizens Utilities (relative to its stock dividend class). We find that flows to dividend prone (averse) mutual funds increase the comovement among dividend-paying (non-dividend paying) stocks. Overall, the evidence supports the proposition that the trading of pro-dividend (dividend-averse) clienteles induces an extra factor in dividend payers (non-payers), beyond those associated with changes in common factors.

Keywords: Dividend; Dividend clientele; Comovement; Style investing (search for similar items in EconPapers)
JEL-codes: G12 G35 H20 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:jfinec:v:132:y:2019:i:1:p:103-125