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Dividend Spreads

Author

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  • Castanias, Rick
  • Chung, Ki-Young
  • Johnson, Herb

Abstract

This article does four things: it calls attention to an important phenomenon heretofore unmentioned in the literature, that is, the dividend spread; it presents open-interest and early-exercise d ata for in-the-money calls around ex dividend dates; it demonstrates that previous results concerning the efficiency of the options market around the ex dividend date are invalid; and it provides an estimate of the effective bid-ask spread for informationless trades. The auth ors' data indicates that the bid-ask spread for this type of trade is quite small. Copyright 1988 by the University of Chicago.

Suggested Citation

  • Castanias, Rick & Chung, Ki-Young & Johnson, Herb, 1988. "Dividend Spreads," The Journal of Business, University of Chicago Press, vol. 61(3), pages 299-319, July.
    • Handle: RePEc:ucp:jnlbus:v:61:y:1988:i:3:p:299-319
    DOI: 10.1086/296434
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    Cited by:

    1. Pool, Veronika Krepely & Stoll, Hans R. & Whaley, Robert E., 2008. "Failure to exercise call options: An anomaly and a trading game," Journal of Financial Markets, Elsevier, vol. 11(1), pages 1-35, February.

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