Ex-dividend day price and volume: the case of cum-ex trading

Moritz Wagner () and Xiaopeng Wei

Applied Economics, 2023, vol. 55, issue 51, 6062-6075

Abstract: In this paper, we analyse the extent of cum-ex trading in European markets. We document that the abnormal trading activity around the dividend day of a stock can be attributed to cum-ex trading, in addition to existing tax clientele hypotheses. Cum-ex trading is positively associated with dividend yield, which is consistent with maximizing returns from this strategy. Based on abnormal trading volume, we estimate a substantial loss to treasuries due to illicit tax refunds of withholding tax on dividends. Our results are robust, controlling for confounding effects and investors’ tax preference and heterogeneity.

Date: 2023
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DOI: 10.1080/00036846.2022.2141450

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