Limit Order Adjustment Mechanisms and Ex-Dividend Day Stock Price Behavior

Keith Jakob and Tongshu Ma

Financial Management, 2005, vol. 34, issue 3

Abstract: Unlike the NYSE, the Toronto Stock Exchange (TSX) does not adjust prices in the outstanding limit orders on ex-dividend days. We find that TSX ex-day stock price behavior differs from that on the NYSE in several key aspects. In each case, the TSX ex-day behavior is consistent with the lack of a limit order adjustment mechanism.Our findings confirm that market microstructure is an important factor that contributes to the observed Canadian ex-day price behavior. Our findings also resolve the puzzle of the relatively small ex-day price drop in Canada.

Date: 2005
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