Ex-day behavior: tax or short-term trading effects

Article Abstract:

This study examines the behavior of share prices around the ex-dividend dates before and after the introduction of the 1988 Income and Corporation Taxes Act that reduced substantially the tax differential between dividends and capital gains in the United Kingdom. We find that, in the pre-1988 period when the differential taxation of dividends and capital gains is high, ex-day returns are positive and significant. In contrast, in the post-1988 period, ex-day returns are, in most cases, negative and insignificant. Further analysis reveals that, while ex-day returns are significantly related to dividend yield and to the length of the settlement period, they are not affected by the commonly used measures of transaction costs, such as the bid-ask spread and trading volume, or by the day of the week, month of the year, type of dividend distribution, or number of days to the actual receipt of the cash dividend. We conclude that taxation affects significantly ex-day share prices in the United Kingdom. (Reprinted by permission of the publisher.)

Dividends, Capital gains tax

---

Tax-induced trading: the effect of the 1986 Tax Reform Act on stock market activity

Article Abstract:

The end of favorable tax treatment for long-term capital gains caused investors to reassess tax-induced trading strategies. This study compares trading behavior in December 1986 and January 1987 with previous years. Our results indicate that these tax code changes had a powerful effect on trading behavior. Relative trading volume was considerably higher in December 1986 for long-term winners but not significantly lower for long-term losers. Results also indicate altered trading patterns based on short-term gains in December 1986 and for long-term winners in January 1987. (Reprinted by permission of the publisher.)

---

Overreaction and insider trading: evidence from growth and value portfolios

Article Abstract:

Insider transactions are not random across growth and value stocks. We find that insider buying climbs as stocks change from growth to value categories. Insider buying also is greater after low stock returns, and lower after high stock returns. These findings are consistent with a version of overreaction which says that prices of value stocks tend to lie below fundamental values, and prices of growth stocks tend to lie above fundamental values. (Reprinted by permission of the publisher.)

Securities, Insider trading in securities, Insider trading (Securities), Growth companies

Similar abstracts:

• Abstracts: Power and international accounting standard setting: Evidence from segment reporting and intangible assets projects
• Abstracts: Audit prices, product differentiation, and scale economies: further evidence from the Australian market. The budgetary and performance influences of product standardization and manufacturing process automation
• Abstracts: The supply of and demand for accounting information in an unregulated market: examples from the Lancashire cotton mills, 1855-1914
• Abstracts: Uncertainty in the transaction environment: an empirical test. A meta-analysis on the comparative effectiveness of devil's advocacy and dialectical inquiry
• Abstracts: R&D spending, domestic competition, and export performance of Japanese manufacturing firms. A sociological view on why firms differ

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.