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Tax Heterogeneity And Trading Volume Around The Ex-Dividend Day: Estonian Evidence

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  • Priit Sander

Abstract

This paper examines the trading pattern around the ex-dividend day in the Estonian stock market between 2000 and 2006. An analysis of the Estonian income tax law confirmed that despite its simplicity there exists differential treatment of capital gains and dividends as well as tax heterogeneity among investors. An empirical analysis of the trading data showed a statistically significant abnormal trading volume around the ex-dividend day. By putting these two aspects together and investigating short-term changes in ownership structure around the ex-dividend day it can be concluded that in the Estonian stock market investors use dynamic tax-induced trading strategies around the ex-dividend day. The occurrence of the learning effect and avoidance of transaction costs were also revealed by an analysis of these transactions.

Suggested Citation

  • Priit Sander, 2007. "Tax Heterogeneity And Trading Volume Around The Ex-Dividend Day: Estonian Evidence," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 54, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    • Handle: RePEc:mtk:febawb:54
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    Cited by:

    1. Priit Sander & Mark Kantšukov, 2009. "Effect of Corporate Taxation System on Profitability and Market Ratios – the Case of ROE and P/B Ratios," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 1(2).

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