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Exploiting the dividend month premium: evidence from Germany

Author

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  • Felix Kreidl

    (Chair of Finance and Banking, Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU))

  • Hendrik Scholz

    (Chair of Finance and Banking, Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU))

Abstract

Dividend payments are firm events on a recurring and predictable basis. High returns in the period between announcement-date and ex-dividend date are the main driver for the so-called dividend month premium, which are positive abnormal returns in months in which corporations are predicted to issue dividend payments. In our empirical analysis of the German stock market, we find a robust dividend month premium, which is particularly high for stocks with positive dividend surprise. Knowing the dates of dividend announcements and payments enable portfolio managers to exploit the dividend month premium. Also taking into account tracking error and transaction costs, we show that simple portfolio-enhancing strategies lead to highly significant abnormal returns.

Suggested Citation

  • Felix Kreidl & Hendrik Scholz, 2021. "Exploiting the dividend month premium: evidence from Germany," Journal of Asset Management, Palgrave Macmillan, vol. 22(4), pages 253-266, July.
    • Handle: RePEc:pal:assmgt:v:22:y:2021:i:4:d:10.1057_s41260-021-00215-3
    DOI: 10.1057/s41260-021-00215-3
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    References listed on IDEAS

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    Cited by:

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    3. Ling, Aifan & Li, Junxue & Wen, Limin & Zhang, Yi, 2023. "When trackers are aware of ESG: Do ESG ratings matter to tracking error portfolio performance?," Economic Modelling, Elsevier, vol. 125(C).

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