The behavior of stock price on ex-dividend day: A study on New York Stock Exchange and London Stock Exchange
Independent thesis Advanced level (degree of Master (Two Years)), 10 credits / 15 HE creditsStudent thesis
The main aim of this thesis is to analyze the behavior of stock price on ex-dividend day in London Stock Exchange and New York Stock Exchange and draw a conclusion about the market efficiency based. We collect 200 sample companies dividend, ex-dividend day and cum dividend day stock price to compare with NYSE composite index and FTSE 100 for London Stock Exchange.
To answer the research question and specific purpose of our thesis we developed five null hypothesis based on raw price ratio (RPR), market-adjusted price ratio (MAPR), raw price drop ratio (RPD), market-adjusted price drop ratio (MAPD) and market-adjusted abnormal return (MAAR). We used t-statistic to find the mean differences between observed values and standard values. We also show multiple regression analysis to show the relationship between ex-dividend day stock price and dividend, cum-dividend day stock price.
This thesis documented that same amount of stock price drop in 2008 New York Stock Exchange compare with dividend amount. In this case our null hypothesis accepted. On the other hand in London Stock Exchange shows higher drop of stock price than dividend amount in 2008 against the taxation rate rules of prior study. In 2007 both stock market shows the less drop of stock price than dividend amount. Therefore our null hypothesis rejected. We also documented that London Stock Exchange more volatile than New York Stock Exchange to consider the MAAR, tax rate and standard deviation. So we find significant evidence of market abnormal return which create an opportunity of market inefficiency and arbitrage opportunity for investors.
So, our thesis output shows mixed evidence for London Stock Exchange and New York Stock Exchange.
Place, publisher, year, edition, pages
2011. , 63 p.
Ex-dividend day, cum-dividend day, dividend, and market efficiency
IdentifiersURN: urn:nbn:se:umu:diva-44996OAI: oai:DiVA.org:umu-44996DiVA: diva2:424173
2011-04-13, S 308, Umeå School of Business, Umeå, 13:15 (English)
UppsokSocial and Behavioural Science, Law
Isaksson, Anders, Assistant Professor
Nylén, Ulrica, Studierektor