Attention effect on the ex date evidence from taiwan
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Attention effect on the ex date: Evidence from Taiwan. Shing-yang Hu and Yun-lan Tseng. Motivation. Ex-dividend day phenomenon Stock returns are significantly positive Campbell and Beranek (1955); Durand and May (1960). Observed in many countries

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Attention effect on the ex date evidence from taiwan

Attention effect on the ex date: Evidence from Taiwan

Shing-yang Hu

and

Yun-lan Tseng


Motivation
Motivation

  • Ex-dividend day phenomenon

    • Stock returns are significantly positive

      • Campbell and Beranek (1955); Durand and May (1960).

    • Observed in many countries

      • Kato and Lowenstein (1995); Frank and Jagannathan (1998)

    • Observed for various distributions

      - cash dividends, stock dividends, and stock splits

      • Eades, Hess, and Kim (1984)


Motivation literature
Motivation - Literature

  • Tax

    • Elton and Gruber (1970)

  • Microstructure

    • Bali and Hite (1998); Dubofsky (1992)

  • Small investor preference

    • Black (1986); Lakonishok and Lev (1987)


  • Contribution new interpretation
    Contribution – New interpretation

    • Attention paid to ex dates

      • Higher publicity

        • Company announcement, Stock exchange

        • Brokerage houses and newspapers reports

    • Attract a higher demand from small investors to push up the price

    • High attention stocks gets more purchase from small investors


    Contribution new evidence
    Contribution – New evidence

    • Provide cross-sectional evidence that, on ex dates, high attention stocks have

      • More newspaper reports (publicity)

      • More purchase from small investors

      • High returns


    Contribution new evidence1
    Contribution – New evidence

    • Measures of attention

      • Distribution rate

      • Turnover

        • Six-month period before the ex date

      • Market-to-book value of equity

      • Growth in the number of small shareholders


    Contribution new evidence2
    Contribution – New evidence

    • Provide the direct link between repots, small investors purchase, and ex-date returns


    Data sample
    Data - Sample

    • 1999 to 2005

    • All stock dividend distributions from companies listed on the Taiwan Stock Exchange (398)

      • Includes nontaxable (138), taxable (123), and mixed distributions (137)

      • Excludes distributions that are combined with a cash dividend, a rights offering, or an employee stock bonus


    Data media reports
    Data – Media reports

    • Search for the keyword “ex dividend” in the InfoTimes database.

      • Covers news reported by the China Times Group

    • Newspapers report 70 (less than 20%) events over the period -9 to 0

      • 40 ex dates are reported


    Data order imbalance of small investors
    Data –Order imbalance of small investors

    • Definition of small investors

      • Daily order value < NT$200,000

    • Definition of order imbalance

      • (buy-sell)/(buy+sell)

    • Aggressive orders

      • For orders submitted before the market opens

        • Buy (sell) order is aggressive if its limit price is higher (lower) than the closing price of the previous day adjusted for the distribution.

      • For orders that arrive after the opening

        • Buy orders is aggressive if its limit price is higher than the prevailing best ask

        • Sell order is aggressive if its limit price is lower than the best bid


    Data standardized abnormal order imbalance
    Data –Standardized abnormal order imbalance


    Data abnormal return
    Data – abnormal return

    , t = -50,…,-6.


    Results media reports
    Results – Media reports


    Results small investor oib
    Results – Small investor OIB


    Results abnormal return
    Results – Abnormal return


    Connections between attention and return
    Connections between attention and return

    Et-1(rit) = a Et-1(Ait)

    Et-1(rit) = b1 DISTi + b2 TURNi + b3 M/Bi + b4 SSHi

    Et-1(Ait) = c1 DISTi + c2 TURNi + c3 M/Bi + c4 SSHi

    Nonlinear restrictions

    Overidentifying restrictions

    E[DISTi(ri– aAi)] = E[TURNi(ri– aAi)] = E[M/Bi(ri– aAi)] = E[SSHi(ri– aAi)] = 0.


    Results connection
    Results – Connection


    Results institution oib
    Results – Institution OIB


    Results large investor oib
    Results – Large investor OIB


    Results large investor oib1
    Results – Large investor OIB


    Results small investor oib1
    Results – Small investor OIB


    Results alternative hypothesis
    Results – Alternative hypothesis


    Results annual regression
    Results – Annual regression


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