Ex-dividend day trading: Who, how, and why?: Evidence from the Finnish market

Elias Rantapuska

Journal of Financial Economics, 2008, vol. 88, issue 2, 355-374

Abstract: This study examines the ex-dividend day trading behavior of all investors in the Finnish stock market. Consistent with dynamic dividend clientele theories, investors with a preference for dividend income buy shares cum-dividend and sell ex-dividend; the reverse is true for investors with the opposite preference. Investors also engage in overnight arbitrage, earning on average a 2% overnight return on their invested capital. Trades at the investor-level reveal that idiosyncratic risk is an important determinant in the choice of stock for short-term ex-day trading. Furthermore, transaction costs and dividend yield jointly determine whether the volume of short-term trading activity is nonzero.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:88:y:2008:i:2:p:355-374

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