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Exploiting Market Reactions to Dividend Cuts: Contrarian Trading Strategies in a Short Investment Horizon - Evidence from the Swedish Stock Market
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
2016 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper investigates the impact of dividend reduction announcements on the returns to stocks listed on the Stockholm Stock Exchange. We perform an event study on dividend cutting firms between 2002-2016 to determine if contrarian trading on the basis of negative dividend announcement yields abnormal returns. We evaluate the immediate market reaction during a three-day event window surrounding dividend announcements. Thereafter we test a contrarian trading strategy by examining abnormal returns during a holding period up to twenty days following the initial event. We evaluate the results in reference to previous literature on post earnings (dividend) announcement drift and contrarian investment strategies. The findings suggest that the initial market reaction to dividend cuts is negative, but that the abnormal returns to buying stock following dividend reduction announcements are negligible. Furthermore, we argue that there might be means of increasing these returns by supplementary analysis of firm specifics.

Place, publisher, year, edition, pages
2016.
Keyword [en]
Contrarian Trading Strategies, Dividend Announcements, Abnormal Returns, Event Study
National Category
Business Administration
Identifiers
URN: urn:nbn:se:uu:diva-298351OAI: oai:DiVA.org:uu-298351DiVA: diva2:945832
Subject / course
Business Studies
Educational program
Bachelor Programme in Business and Economics
Supervisors
Examiners
Available from: 2016-07-04 Created: 2016-07-03 Last updated: 2016-07-04Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf