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Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex-Dividend Pricing before and after Decimalization

Publication ,  Journal Article
Graham, JR; Michaely, R; Roberts, MR
Published in: Journal of Finance
January 1, 2003

By the end of January 2001, all NYSE stocks had converted their price quotations from 1/8s and 1/16s to decimals. This study examines the effect of this change in price quotations on ex-dividend day activity. We find that abnormal ex-dividend day returns increase in the 1/16 and decimal pricing eras, relative to the 1/8 era, which is inconsistent with microstructure explanations of ex-day price movements. We also find that abnormal returns increase in conjunction with a May 1997 reduction in the capital gains tax rate, as they should if relative taxation of dividends and capital gains affects ex-day pricing.

Duke Scholars

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Published In

Journal of Finance

DOI

ISSN

0022-1082

Publication Date

January 1, 2003

Volume

58

Issue

6

Start / End Page

2611 / 2636

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
 

Citation

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Graham, J. R., Michaely, R., & Roberts, M. R. (2003). Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex-Dividend Pricing before and after Decimalization. Journal of Finance, 58(6), 2611–2636. https://doi.org/10.1046/j.1540-6261.2003.00617.x
Graham, J. R., R. Michaely, and M. R. Roberts. “Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex-Dividend Pricing before and after Decimalization.” Journal of Finance 58, no. 6 (January 1, 2003): 2611–36. https://doi.org/10.1046/j.1540-6261.2003.00617.x.
Graham, J. R., et al. “Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex-Dividend Pricing before and after Decimalization.” Journal of Finance, vol. 58, no. 6, Jan. 2003, pp. 2611–36. Scopus, doi:10.1046/j.1540-6261.2003.00617.x.
Graham JR, Michaely R, Roberts MR. Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex-Dividend Pricing before and after Decimalization. Journal of Finance. 2003 Jan 1;58(6):2611–2636.
Journal cover image

Published In

Journal of Finance

DOI

ISSN

0022-1082

Publication Date

January 1, 2003

Volume

58

Issue

6

Start / End Page

2611 / 2636

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment