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Educating investors about dividends

Author

Listed:
  • Hackethal, Andreas
  • Hanspal, Tobin
  • Hartzmark, Samuel M.
  • Bräuer, Konstantin

Abstract

We educate investors with significant dividend holdings about the benefits of dividend reinvestment and the costs of misperceiving dividends as additional, free income. The intervention increases planned dividend reinvestment in survey responses. Using trading records, we observe a corresponding causal increase in dividend reinvestment in the field of roughly 50 cents for every euro received. This holds relative to their prior behavior and a placebo sample. Investors who learned the most from the intervention update their trading by the largest extent. The results suggest the free dividends fallacy is a significant source of dividend demand. Our study demonstrates that simple, targeted, and focused educational interventions can affect investment behavior.

Suggested Citation

  • Hackethal, Andreas & Hanspal, Tobin & Hartzmark, Samuel M. & Bräuer, Konstantin, 2024. "Educating investors about dividends," SAFE Working Paper Series 420, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:297997
    DOI: 10.2139/ssrn.4827769
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    References listed on IDEAS

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    More about this item

    Keywords

    Investor education; dividends; free dividend fallacy; educational intervention;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • D10 - Microeconomics - - Household Behavior - - - General

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