Risk Shift Following Dividend Change Announcement: The Role of Trading Volume

Sangphill Kim, Oliver Rui and Peter Xu

Review of Quantitative Finance and Accounting, 2002, vol. 19, issue 1, 45-63

Abstract: This study investigates the role of the trading volume in explaining the shift of firm's total and systematic risk when a dividend change is announced. We compared the differential interpretation hypothesis and pre-announcement disagreement hypothesis with more than 20,000 samples collected for 30 years. We found that the total risk generally increases regardless of the level of abnormal trading volume, which supports the differential interpretation hypothesis. We also found a positive relationship between announcement-period abnormal trading volume and post-announcement changes in beta, which is only consistent with the differential interpretation hypothesis. However, the decrease in beta for the majority of sample firms is only consistent with the pre-announcement disagreement hypothesis. Copyright 2002 by Kluwer Academic Publishers

Date: 2002
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