Price Reactions to Dividend Initiations and Omissions: Overreaction or  Drift?

Michaely, Roni; Thaler, Richard H.; Womack, Kent L.

doi:10.3386/w4778

Cited by 273 publications

(281 citation statements)

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“…In the same way Michaely, Thaler and Womack (1995) found an adjusted market return of about 25% after three years following an introduction and an abnormal return of 15% for the three years following a failure. DeAngelo, De Angelo, and Skinner (1996), do not support the hypothesis that an increase in dividends is a signal for future earnings of the firm.…”

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confidence: 51%

“…The average excess return is 3.4% for initiation and -7% for omissions. Michaely, Thaler, and Womack (1995) find that the effect of a unit change in yield had a greater effect on prices for initiations than it did for omissions. Watts (1973) tested whether earnings of the following year could be explained by the dividend and earning observed in current and past year.…”

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confidence: 79%

“…Asquith and Mullins (1983), Healy and Palepu (1988), and Michaely, Thaler and Womack (1995) tested another problematic in particular, they interested in firms which performed dividend initiations and omissions. The results indicated that the market reacts quite severely to those announcements.…”

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confidence: 99%

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Dividend Policy in Tunisia: A Signalling Approach

Taleb¹

2018

IJEF

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The main objective of this study was to establish the stock price reaction to dividend announcements of firms quoted at the Tunisian Securities exchange (TSE). To do so, we develop a traditional event study. Two robust results emerge: First, when we observe the 196 announcements of dividends between years 1996-2004, the result is inconsistent with signaling theory, as long as, no abnormal return was observed on the announcement day (event period). Second, When the overall sample is divided into three sub-group (dividend increase, dividend-no-change and dividend), we observe a significant and abnormal return about -1.242 percent and -1.697 percent respectively on day D(t 0 -4) and D(t 0 +4) around the dividend announcement day (Dt 0 ) only for the sub-group of firms that decreases their dividend. This result corroborates prior research in Tunisian context [Ben Naceur and al. (2006);Guizani and Kouki (2011)] that confirm, by using a different approach, the Lintner"s (1956) conclusions which states that Tunisian" firms generally tend to avoid a dividend decrease (or cuts) and can constitute a supporting evidence of the dividend information content hypothesis in TSE.

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confidence: 51%

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confidence: 79%

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Dividend Policy in Tunisia: A Signalling Approach

Taleb¹

2018

IJEF

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“…We distinguish between small and large investors to allow for the possibility that individual agents are subject to biases, while firms and their associated professionals rationally account for informational distortions. This distinction follows the previous behavioral 3 literature on biases in markets, which points to the specialization and experience of firms as well as competitive pressure to which firms but not individuals are exposed. 4 Following previous market microstructure literature [Lee and Radhakrishna, 2000], we distinguish between small (individual) and large (institutional) investors based on the size of their trades.…”

Section: Introductionmentioning

confidence: 95%

Are Investors Naive About Incentives?

Malmendier

Shanthikumar

2004

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Traditional economic analysis of markets with asymmetric information assumes that uninformed agents account for the incentives of informed agents to distort information. We analyze whether investors in the stock market internalize such incentives. Stock recommendations of security analysts are likely to be biased upwards, particularly if the issuing analyst is affiliated with the underwriter of the recommended stock. Using the NYSE Trades and Quotations database, we find that large (institutional) traders account for the upward bias and exert no abnormal trade reaction to buy recommendations, and significant selling pressure in response to hold recommendations. Small (individual) traders do not account for the upward shift and exert significantly positive pressure for buys and zero pressure for hold recommendations. Moreover, large traders discount positive recommendations from affiliated analysts more than from unaffiliated analysts, while small traders do not distinguish between them. The naive trading behavior of small investors induces negative abnormal portfolio returns.

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“…For example, Michaely, Thaler, and Womack [1995] find that short-run prices react more strongly to dividend omissions than to dividend initiations.…”

Section: Overreaction Hypothesismentioning

confidence: 95%

Extreme Return Reversal in the Stock Market

Hirschey

2003

JPM

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Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?

Cited by 273 publications

References 0 publications

Dividend Policy in Tunisia: A Signalling Approach

Dividend Policy in Tunisia: A Signalling Approach

Are Investors Naive About Incentives?

Extreme Return Reversal in the Stock Market

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