Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex-Dividend Pricing before and after Decimalization
Journal Article (Journal Article)
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.
Full Text
Duke Authors
Cited Authors
- Graham, JR; Michaely, R; Roberts, MR
Published Date
- January 1, 2003
Published In
Volume / Issue
- 58 / 6
Start / End Page
- 2611 - 2636
International Standard Serial Number (ISSN)
- 0022-1082
Digital Object Identifier (DOI)
- 10.1046/j.1540-6261.2003.00617.x
Citation Source
- Scopus