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Dividends And Uncertainty: Evidence From The Italian Market

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  • ANNA BATTAUZ

    (Istituto di Metodi Quantitativi, Università Bocconi, V.le Isonzo 25, 20135 Milano, Italia)

  • FRANCESCA BECCACECE

    (Istituto di Metodi Quantitativi, Università Bocconi, V.le Isonzo 25, 20135 Milano, Italia)

Abstract

In this paper we investigate the behavior of the market around dividend payment dates. Our empirical analysis, based on a Bayesian approach applied to Italian stock data, confirms the presence of abnormal returns at the ex-dividend date, as already documented in the literature for other markets. Calibrating a suitable model introduced in [1] to take care of the additional randomness pertubing the market around dividend payment dates, we investigate the effects on the derivative evaluation. Looking at the NoArbitrage prices of American call options written on some Italian dividend-paying stock and comparing them with the marketed prices, we conclude that the effect of this additional randomness can be neglected.

Suggested Citation

  • Anna Battauz & Francesca Beccacece, 2004. "Dividends And Uncertainty: Evidence From The Italian Market," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 45-62.
    • Handle: RePEc:wsi:ijtafx:v:07:y:2004:i:01:n:s0219024904002323
    DOI: 10.1142/S0219024904002323
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    Cited by:

    1. Battauz, A. & Pratelli, M., 2004. "Optimal stopping and American options with discrete dividends and exogenous risk," Insurance: Mathematics and Economics, Elsevier, vol. 35(2), pages 255-265, October.

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