Dividend Yields and Stock Returns: Implications of Abnormal January Returns

Donald Keim ()

Rodney L. White Center for Financial Research Working Papers from Wharton School Rodney L. White Center for Financial Research

Abstract: This study examines the empirical relation between stock returns and (long-run) dividend yields. The findings show that much of the phenomenon is due to a non-linear relation between dividend yields and returns in January. Regression coefficients on dividend yields, which some models predict should be non-zero due to differential taxation of dividends and capital gains, exhibit a significant January seasonal, even when controlling for size. This finding is significant since there are no provisions in the after-tax asset pricing models that predict the tax differential is more important in January than in other months.

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Journal Article: Dividend yields and stock returns: Implications of abnormal January returns (1985)
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