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Implications of Dividend Announcements for the Stock Prices and Trading Volumes of DAX Companies (in English)

Author

Listed:
  • Henryk Gurgul

    (Department of Applied Mathematics, University of Science and Technology, Krakow, Poland)

  • Pawe³ Majdosz

    (Department of Quantitative Methods in Economics, School of Economics and Computer Science, Krakow, Poland)

  • Roland Mestel

    (Institute of Banking and Finance, University of Graz, Austria)

Abstract

This paper deals with market reactions to dividend announcements on the German stock market. Our study is based on a model of expected dividends with regard to the reluctance-to-change-dividends hypothesis. State-of-the-art models are used to detect price and volume reactions to dividend news. Empirical results provide evidence that announced dividend changes convey new information to the market. On average, stock prices move in the same direction as dividends. One can observe an increase in stock-return volatility in anticipation of expected news. For the entire sample, we find that trading volumes exhibit significant increases around dividend announcement dates. This supports the hypothesis that dividend change in either direction causes an increase in investors’ propensity to revise their portfolios.

Suggested Citation

  • Henryk Gurgul & Pawe³ Majdosz & Roland Mestel, 2006. "Implications of Dividend Announcements for the Stock Prices and Trading Volumes of DAX Companies (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 56(1-2), pages 58-68, January.
    • Handle: RePEc:fau:fauart:v:56:y:2006:i:1-2:p:58-68
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    References listed on IDEAS

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    Cited by:

    1. Dr. Jeetendra Dangol, 2016. "Nepalese Stock Market Efficiency in Respect of Cash and Stock Dividend Announcement," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 7(3), pages 60-71, September.
    2. repec:mth:ijafr8:v:8:y:2018:i:2:p:92-117 is not listed on IDEAS
    3. Paul Abbondante, 2010. "Trading Volume and Stock Indices: A Test of Technical Analysis," American Journal of Economics and Business Administration, Science Publications, vol. 2(3), pages 287-292, September.

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    More about this item

    Keywords

    abnormal stock returns; dividend announcements; GARCH modeling; trading volume;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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