We document an asset-pricing anomaly whereby companies have positive abnormal returns in months when a dividend is predicted. The premium is consistent with price pressure from dividend-seeking investors.
The Dividend Month Premium
Samuel Hartzmark, David Solomon
Research
55 Pages
Key Takeaways
Abnormal Returns: Simple difference portfolios produce abnormal returns of 37 to 53 basis points per month relative to a four-factor model, with some specifications producing abnormal returns as high as 115 basis points per month.
Large Anomoly: Stock returns during dividend months represent a substantial asset-pricing anomaly. The dividend month premium is as large as the value premium, but with less volatility.
Dividend Demand: Measures of liquidity and demand for dividends are associated with larger price increases in the period before the ex-day (when there is no news about the dividend), and larger reversals afterwards.
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