ex day behavior with dividend preference and limitations to short term arbitrage the case of swedish lottery bonds abstract swedish lottery bonds offer a unique opportunity to study ex day effects in an environment where cash distributions are tax advantaged relative to capital gains thus in the lottery bond market we observe a reversal of the preference for capital gains that researchers have cited as an explanation for the ex day behavior of u s equities further in this market there are barriers to short term arbitrage when prices do reflect the tax preferences of individual investors we find the bonds are priced around the ex day to reflect differential tax rates on income and capital gains consistent with the prevailing tax regimes the bonds consistently experience negative returns over the coupon payment period and in fact often sell at negative yields prior to the cash distribution as one would expect given tax motivated trading between high tax investors who buy prior to the distribution and low tax investors who buy after the distribution

nonparametric bounds on the returns to language skills this paper applies the theoretical literature on nonparametric bounds on treatment effects to the estimation of how limited english proficiency lep affects wages and employment opportunities for hispanic workers in the united states i analyse the identifying power of several weak assumptions on treatment response and selection and stress the interactions between lep and education occupation and immigration status i show that the combination of two weak but credible assumptions provides informative upper bounds on the returns to language skills for certain subgroups of the population adding age at arrival as a monotone instrumental variable also provides informative lower bounds copyright 2005 john wiley sons ltd

ex day behavior tax or short term trading effects this study examines the behavior of share prices around the ex dividend dates before and after the introduction of the 1988 income and corporation taxes act that reduced substantially the tax differential between dividends and capital gains in the united kingdom we find that in the pre 1988 period when the differential taxation of dividends and capital gains is high ex day returns are positive and significant in contrast in the post 1988 period ex day returns are in most cases negative and insignificant further analysis reveals that while ex day returns are significantly related to dividend yield and to the length of the settlement period they are not affected by the commonly used measures of transaction costs such as the bid ask spread and trading volume or by the day of week month of the year type of dividend distribution or number of days to the actual receipt of the cash dividend we conclude that taxation affects significantly ex day share prices in the previous studies have documented that the risk adjusted abnormal returns on the ex dividend dates are positive and significantly related to the dividend yield the interpretation of these findings is however controversial the question relates to what category of investors sets ex day prices elton and

dividend stripping risk exposure and the effect of the 1984 tax reform act on the ex dividend day behavior this article investigates the importance of risk exposure and the effects of the 1984 tax reform act on the ex dividend day behavior the tax reform appears to have inhibited short term trading activities by increasing the risk exposure of incorporated traders moreover stocks for which existing listed options permitted the reduction of risk through hedged dividend stripping strategies were affected much less from the new tax code than their nonoptionable counterparts this implies that risk affects investors dividend yield choice and that the ex dividend day behavior may be caused in part by the existence of risk premia copyright 1989 by the university of chicago

the ex dividend day behavior of canadian stock prices tax changes and clientele effects with some simple assumptions the ex dividend day price drop and the associated dividend can be used to measure the market s marginal tax rate previous research has estimated the implied tax rate for the u s this paper extends the analysis to canada where the tax treatment of dividends and capital gains is completely different from that in the u s the paper also presents estimates from 1970 80 to include four distinct periods when the tax treatment was different hence we include an implied test of market efficiency as well as those for the relevance of taxes and the existence of tax based dividend clienteles

the effect of land use regulation on housing and land prices abstract this paper investigates the effects of land use regulation restrictiveness on house and vacant land prices in contrast to prior studies the index of restrictiveness is treated as an endogenous variable and estimated effects are allowed to vary by market setting using data on more than 100 florida cities greater regulation restrictiveness is found to increase house price and decrease land price evidence is also provided showing that more restrictiveness increases the size of newly constructed homes

valuation effects of canadian stock split announcements abstract the abnormal returns for two types of announcement dates are examined for a large sample of stock splits on the toronto stock exchange tse the mean abnormal return is positive and statistically significant for the split proposal announcement date and positive and not statistically significant for the split approval date these findings are not only consistent with those found for stock splits in the united states grinblatt masulis and titman 1984 but are also robust to various thin trading autocorrelation and heteroscedasticity adjustments and the exclusion of splitting stocks which are interlisted on non canadian stock markets

taxes and dividends the uk evidence abstract this paper provides empirical evidence on the simultaneous effects of both corporation and personal income taxes on dividend payment adjustments and on the behaviour of share prices on the ex dividend dates the results show that companies set their dividend policies to minimise their tax liability and to maximise the after tax return of their shareholders in particular firms that are unable to deduct the advanced corporation tax from their tax liability are found to pay low dividends in addition consistent with the tax hypothesis we find that the differential taxation of dividends and capital gains results in a decrease in ex day share prices by significantly less than the amount of the dividend there is no evidence of a tax induced dividend clientele

migration housing market and labor market responses to employment shocks abstract one reason for the united states economic success is the willingness of its residents to follow jobs households decisions to move depend not only on job prospects but also on the relative cost of housing i investigate how the housing market affects the flow of workers across cities this occurs through at least two channels the relative mobility of homeowners versus renters and the relative cost of housing across markets i use homeownership rates to measure the former and use an index that measures house prices across metropolitan statistical areas msas and the price elasticity of housing supply to capture the latter to show how variation in the these housing market factors not only affects cross city migration but also the housing and labor markets i estimate a var model of migration employment wages house prices and new housing supply using annual data from 277 us msas for 1990 2006 the response functions based on labor supply and demand shocks show substantial variation when evaluated at different values of the homeownership rate the price elasticity of housing supply and relative housing prices i also allow for spillover effects in the model that reflect the impact of a labor demand shock in the nearest city

urban decline and durable housing urban decline is not the mirror image of growth and durable housing is the primary reason the nature of decline is so different this paper presents a model of urban decline with durable housing and verifies these implications of the model 1 city growth rates are skewed so that cities grow more quickly than they decline 2 urban decline is highly persistent 3 positive shocks increase population more than they increase housing prices 4 negative shocks decrease housing prices more than they decrease population 5 if housing prices are below construction costs then the city declines and 6 the combination of cheap housing and weak labor demand attracts individuals with low levels of human capital to declining cities

tick size share prices and stock splits minimum price variation rules help explain why stock prices vary substantially across countries and other curiosities of share prices companies tend to split their stock so that the institutionally mandated minimum tick size is optimal relative to the stock price a large relative tick size provides an incentive for dealers to make markets and for investors to provide liquidity by placing limit orders despite its placing a high floor on the quoted bid ask spread a simple model suggests that idiosyncratic risk firm size and visibility of the firm affect the optimal relative tick size and thus the share price in stock markets around the world the average price per share differs substantially the median u s stock for example sells for about 40 a typical london stock sells for about 5 7 50 and a typical hong kong share is about 2 furthermore when stock prices rise above a country s usual trading range firms often split their stocks to restore prices to that range why are these price ranges so different among countries these trading ranges can be remarkably stable over time during the half century from 1943 to 1994 the s p composite index increased over 1 500 percent yet the average new york stock exchange nyse share price was

stock splits and stock dividends why who and when this study investigates empirically why firms split their stock or distribute stock dividends and why the market reacts favorably to these distributions the findings suggest that stock splits are mainly aimed at restoring stock prices to a normal range some support can also be found for the oft mentioned signalling motive of stock splits stock dividends are altogether different from stock splits and they appear to be a decreasing phenomenon the clue to stock dividend distributions may lie in their perceived substitution for relatively low cash dividends neither stock splits nor stock dividends are recent phenomena the latter dates back to the elizabethan age among the first to declare such dividends was the east india company which while enjoying great prosperity declared in 1682 a stock dividend of one hundred percent during the eighteenth and nineteenth centuries stock dividends were quite frequently distributed by british companies in the united states an early and frequently discussed stock dividend distribution was that of the new york central railroad just prior to its union with the hudson river railroad in 1869 surprisingly stock dividends were quite popular in the u s despite their being subject to federal income tax thus for example during the seven years prior to 1922 the year in which the supreme court exempted the recipients of stock dividends from taxes the ratio of stock dividends to all dividend distributions was 14 5 percent this ratio increased to a staggering forty seven percent during the seven years succeeding the supreme court decision during 1936 to 1937 some american companies distributed stock dividends to avoid the undistributed profit tax

language training language proficiency and earnings of immigrants in norway this paper uses a simple probit model to determine the impact of language training on the language proficiency of third world immigrant men in norway it also estimates the labour market returns to norwegian language proficiency the results show that immigrants who participate in language training programme are more likely to acquire speaking and reading proficiencies in norwegian language than those who do not contrary to expectation language proficiency has no significant effect on immigrants earnings a probable explanation may be that immigrants need norwegian language proficiency to get into jobs in the norwegian labour market once they are in employment their wages are not necessarily determined by their proficiency in norwegian consistent with the assimilation hypothesis earlier waves of immigrants have higher earnings than do more recent waves and part of the initial earnings deficit experienced by more recent immigrants can be attributed to language deficiency there was no evidence of s

ex dividend day stock price behavior the case of the 1986 tax reform act this paper analyzes the behavior of stock prices around ex dividend days after the implementation of the 1986 tax reform act that dramatically reduced the difference between the tax treatment of realized long term capital gains and dividend income in 1987 and completely eliminated the differential in 1988 we show that this tax change had no effect on the ex dividend stock price behavior which is consistent with the hypothesis that long term individual investors have no significant effect on ex day stock prices during this time period the results indicate that the activity of short term traders and corporate traders dominates the price determination on the ex day

time variation of ex dividend day stock returns and corporate dividend capture a reexamination this paper documents some empirical facts about ex day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture we find that average abnormal ex dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex day returns during the negotiated commission rates era is consistent with corporate tax based dividend capture ex day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax based dividend capture copyright the american finance association 2000

new evidence that taxes affect the valuation of dividends this paper uses british data to examine the effects of dividend taxes on investors relative valuation of dividends and capital gains british data offer great potential to illuminate the dividends and taxes question since there have been two radical changes and several minor reforms in british dividend tax policy during the last 30 years studying the relationship between dividends and stock price movements during different tax regimes offers an ideal controlled experiment for assessing the effects of taxes on investors valuation of dividends using daily data on a small sample of firms and monthly data on a much broader sample we find clear evidence that taxes affect the equilibrium relationship between dividend yields and market returns these findings suggest that taxes are important determinants of security market equilibrium and deepen the puzzle of why firms pay dividends financial economists have long been puzzled by corporate dividend behavior many individual investors should value a dollar of corporate dividends less than a dollar of corporate retentions because the former gives rise to greater tax liabilities corporations however face equal costs of paying out dividends and retaining earnings miller and modigliani 31 demonstrated that in the absence of taxes dividend policy should have no effect on share valuation if dividends are tax penalized however a value maximizing firm should pay no dividends widespread dividend payments to taxable investors are therefore surprising in 1981 dividend tax revenues in the united states were estimated to exceed 20 billion dollars indeed some have interpreted the large volume of dividends paid as evidence against the rational behavior postulates typically used by economists the dividend question has stimulated a large theoretical and empirical literature concerned with the qluestion of investors valuation of dividends in particular the question of how taxes affect the market valuation of dividends has generated considerable controversy numerous studies including auerbach 2 litzenberger and ramaswamy 24 26 morgan 34 and rosenberg and marathe

equity markets and personal taxation the ex dividend day behaviour of finnish stock prices abstract this paper analyzes the ex dividend day behaviour of stock prices in the finnish stock market the tax structure in finland is strikingly similar to the new tax structure in the u s which was for the first time in effect during the fiscal year 1987 the results in this paper may thus also illuminate the ex dividend day behaviour in the u s stock markets under the new tax law our empirical data show that the average drop in the stock prices on their ex dividend days has been 90 of the amount of the dividend during the years of 1974 to 1985 this is shown to be consistent with the tax explanation taking into account the finnish tax laws it is especially shown that the marginal seller on the ex dividend days is an individual investor with a marginal tax rate of approximately 50

a theory of urban growth in an economy experiencing endogenous economic growth and exogenous population growth we explore two main themes how urbanization affects efficiency of the growth process and how growth affects patterns of urbanization localized information spillovers promote agglomeration and human capital accumulation fosters endogenous growth individual city sizes grow with local human capital accumulation and knowledge spillovers and city numbers generally increase which we demonstrate is consistent with empirical evidence we analyze whether local governments can successfully internalize local dynamic externalities in addition we explore how growth involves real income differences across city types and how urbanization can foster income inequality most nonagricultural production in developed countries occurs in metropolitan areas the underlying reasons why economic activity agglomerates into cities localized information and knowledge spillover also make cities the engines of economic growth in an we gratefully acknowledge support of the national science foundation grants sbr 9422440 and sbr9730142 for this research the work has benefited from conversations with harl ryder on the dynamics of the model and from comments by gilles duranton and participants in seminars at brown colorado and texas austin and a presentation at an isit seminar sponsored by the centre for economic policy research and the national bureau of economic research

the value of dividend imputation tax credits in australia abstract a dividend imputation tax system provides shareholders with a credit for corporate tax paid that can be used to offset personal tax on dividend income this paper shows how to infer the value of imputation tax credits from the prices of derivative securities that are unique to australian retail markets we also test whether a tax law amendment that was designed to prevent the trading of imputation credits affected their economic value before the amendment tax credits were worth up to 50 of face value in large high yielding companies but subsequently it is difficult to detect any value at all

portfolio rebalancing and the effective taxation of dividends and capital gains following the tax reform act of 1986 abstract the tax reform act tra of 1986 among other things equalized the nominal taxation of dividend and capital gains income the evidence is consistent with the hypothesis that ordinary investors rebalanced their portfolio holdings in response to the new taxes such rebalancing appears to have concentrated on liquid stocks indicating that transaction costs are an important consideration for ordinary investors involved in restructuring their portfolio holdings the tax clientele relationships that existed prior to the new act were distorted temporarily but have reappeared by 1988 interestingly investors post reform effective tax rates still give a preference to capital gains as they did prior to the tax reform

dividends and taxes evidence on tax reduction strategies this article investigates two aspects of dividend tax avoidance not addressed by prior research first it examines the aggregate dividend tax savings provided to individuals through tax exempt and tax deferred accumulators using the internal revenue service individual income tax model it then proceeds to determine whether specific provisions of the internal revenue code such as the preferential treatment of capital gains the investment interest limitation and the 100 dividend exclusion affect the individual s choice of investment income finally it provides a direct estimate of the average marginal tax rate on dividends that takes into account tax favored accumulators copyright 1990 by the university of chicago

ex dividend returns the mexican puzzle abstract we study ex dividend returns in mexico where an imputation system entitles individual investors to a net dividend tax credit based on taxation we expect ex day abnormal returns to be negative or at most zero in mexico however they are significantly positive because ex day returns are positive even for stocks restricted to mexican nationals they are not attributable to foreign stockholders tax considerations none of the market microstructure based hypothesis in the literature can explain these positive ex day returns ex day returns in mexico are a puzzle

the ex dividend day behavior of stock prices a re examination of the clientele effect a comment in a recent article in this journal kalay 5 has written an extensive comment on our 1970 article 2 concerning marginal stockholder tax rates and the clientele effect while we are flattered that our article is viewed of sufficient importance to gain this attention 12 years after it was written we do have reservations about kalay s comments we are principally concerned with his interpretations of relevant transaction costs and the role they play in setting equilibrium

the ex dividend day behavior of stock prices the case of japan we provide a comprehensive empirical analysis of stock price behavior around the ex dividend day in japan we find that prices rise on the ex day and that dividend related tax effects appear to be secondary returns around ex dividend days are dominated by the proximity of many ex days to the fiscal year end excess returns of 1 percent which are independent of any dividend related considerations are higher than round trip transaction costs on medium sized transactions prices seem to imply selling pressure before and buying pressure at the start of the new fiscal year these trading patterns appear to be motivated by intercorporate manipulative trading around the end of the firms fiscal year which are unrelated to dividends article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

reduction of constraints on arbitrage trading and market efficiency an examination of ex day returns in hong kong after introduction of electronic settlement previous research documents positive ex dividend day returns in excess of one percent in the unique institutional setting of hong kong where neither dividends nor capital gains are taxed short term arbitrage trades around the ex day were hampered by physical settlement procedures after the recent switch to an electronic settlement system which enables such trades ex day abnormal returns have declined to an insignificant 0 17 percent this drop is more pronounced for high yield stocks which are more likely to attract dividend capture trading the evidence points to the crucial role of short term traders in ensuring the pricing efficiency of financial markets the role of short term traders in financial markets is a matter of considerable controversy the debate on this issue has heightened in the wake of the recent asian currency crisis which some governments blamed on the activities of short term traders critics contend that short term traders engage in speculation leading to excessive and debilitating volatility in market prices others argue that short term traders perform a useful role by increasing valuable liquidity berkman and eleswarapu 1998 report that regulatory changes on the bombay stock exchange curbing short term trading had a measurably adverse impact on asset values supporters of short term traders also argue that these traders make a key contribution to the efficiency of financial markets by constantly scouring the markets for arbitrage opportunities this study examines the impact of the

market valuation of tax timing options evidence from capital gains distributions we examine a distribution that is taxed as a capital gain rather than as a dividend since the distribution induces a realized capital gain while the price change is an unrealized gain ex day return behavior provides evidence of the value of tax timing capital gains we show that investors are compensated 7c in unrealized gains for each dollar of realized capital gains that is 1 of realized capital gains is equivalent to 93c of unrealized gains an investor with a tax rate on realized gains of 15 has an effective tax rate on unrealized capital gains of 8 6 capital gains taxes can be deferred until assets are sold this feature provides the investor who purchases a security with an option regarding the timing of the realization of capital gains and losses this option can be used to lower one s expected tax liability even if capital gains tax rates remain constant for different holding periods an investor who delays the realization of a gain effectively enjoys compound returns on the postponed taxes if capital losses are tax deductible or partially tax deductible tax timing is even more valuable since investors can follow the strategy of selling stocks with capital losses early while postponing the sale of winners recent evidence lends support to the contention that some investors respond to this tax timing option for example odean 1998 shows that u s investors are more likely to sell losers in december than other months similarly grinblatt and keloharju 2002 show that at the end of the tax year finnish investors are more likely to realize losses than gains this type of tax motivated trade seems to affect market returns as shown by poterba and weisbenner 2001 who demonstrate that end of year tax loss selling is related to return variation in the month of january

foreign and domestic investors and tax induced ex dividend day trading abstract this paper reports evidence on the consequences of differential tax treatment for domestic and foreign owners in a market with a high degree of foreign ownership for certain stocks the helsinki stock exchange hse we find that ex dividend day ratios vary with the degree of foreign ownership and detect significantly abnormal ex dividend day trading volumes the average ex dividend price drops for high yield high foreign ownership stocks are likely to lie outside no arbitrage boundaries for domestic taxable investors an investigation of short selling through a derivatives instrument also reveals significant excess trading volumes in ex dividend months the tax heterogeneity of the company s ownership structure seems to play a role in explaining deviations from dividend neutrality more deviations are observed for companies with a more homogeneous ownership structure in terms of taxation

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

why do stock prices drop by less than the value of the dividend evidence from a country without taxes abstract it is well documented that stock prices on ex dividend days drop by less than the value of the dividend on average this has commonly been attributed to the effect of tax clienteles we examine data from the hong kong stock market where neither dividends nor capital gains are taxed as in the u s the average stock price drop is less than the value of the dividend specifically the average dividend for the period 1980 1993 is hk 0 12 and the average price drop is hk 0 06 we are able to account for this both theoretically and empirically through market microstructure arguments

new evidence on the impact of tax loss selling on the turn of the year effect abstract the turn of the year effect is an empirical regularity which refers to the observation that equity returns on days around the turn of the calendar year are significantly high a common explanation for the effect is the tax loss selling hypothesis three studies have tested this hypothesis by examining equity returns before and after the introduction of the war revenue act of 1917 however these studies have reached inconsistent conclusions following these inconsistent findings this paper examines whether the previous findings are robust to the extension of the pre tax period or whether the previous findings are robust to the use of daily data in contrast to the evidence from existing research which has used daily data a significant turn of the year effect is found prior to 1917 furthermore this effect is shown to be independent of other empirical regularities such as the turn of the month effect and the holiday effect and seasonality in dividend payments cannot explain the finding thus we conclude that the tax loss selling hypothesis cannot offer a complete explanation of the turn of the year effect

marginal stockholder tax effects and ex dividend day price behavior evidence from taxable versus nontaxable closed end funds almost all research on the movement of stock prices on ex dividend days has found that prices decline by less than the dividend though this is consistent with tax effects several papers have argued that this phenomenon could be caused by market microstructure effects in this paper we make use of a natural experiment that provides support for the tax explanations of ex dividend behavior some closed end funds have taxable and some have nontaxable dividend distributions both types are subject to taxes on capital gains the implication of this for ex dividendday price behavior is very different between these two types of funds if taxes matter this paper demonstrates that the direction of ex dividendday price behavior is consistent with a tax explanation and that ex dividend day price behavior changes as theory would suggest with changes in the tax law

ex date stock price adjustment to stock dividends a note many recipients of stock dividends look upon them as distributions of corporate earnings and usually in an amount equivalent to the fair value of the additional shares received furthermore it is to be presumed that such views of recipients are materially strengthened in those instances which are by far the most numerous where the issuances are so small in comparison with the shares previously outstanding that they do not have any apparent effect upon the share market price and consequently the market value of the shares previously held remains substantially unchanged

tax induced trading of equity securities evidence from the adr market we examine ex dividend date trading of american depositary receipts adrs using a sample of 1 043 dividends over the period 1988 to 1995 adr dividends are often subject to foreign withholding taxes creating incentives for certain investors to avoid the distribution adrs exhibit negative abnormal ex dividend day returns and their prices behave consistently with their related withholding taxes abnormal trading volume for taxable issues exceeds 130 percent and 300 percent of normal volume on the cum and ex dates respectively abnormal volume is an increasing function of foreign withholding tax rates and decreasing function of transactions costs this abnormal exdate trading activity is consistent with tax motivated trading this paper provides empirical evidence from a sample of american depositary receipts adrs that foreign taxes on dividend income are positively associated with abnormal ex dividend day trading activity researchers have long been interested in the question of whether taxes affect investor behavior around ex dividend days such work has implications for corporate financial and distribution policies and for government tax policies adrs provide a unique setting in which to examine the effects of taxes on investor trading behavior because of the unique features of the foreign withholding taxes that apply to them a number of studies have attempted to isolate the determinants of ex dividend day pricing and trading activity of u s equities and there is considerable evidence of tax induced investor behavior around the ex dividend day for common

price and trading volume reaction surrounding earnings announcements a closer examination the process of information dissemination and interpretation in securities markets is very complex and mostly unobservable while changes in prices and the amount of trading that takes place at the market level provide evidence of information processing verrecchia 1981 demonstrated that these are not sufficient to describe completely the dissemination of information and its interpretation by investors a descriptive study of price changes and trading volume however may still provide some insights into how investors react to information this paper is an empirical investigation of price changes and trading volume during the days surrounding the announcement of quarterly and annual earnings in the wall street journal wsj in the original paper investigating trading volume and price changes surrounding earnings announcements beaver 1968 was primarily concerned with whether the annual earnings announcement had information content i e led to changes in investors assessments of the probability distribution of future returns if there were any significant price changes and or trading volume during the week of the announcement then the annual earnings announcement was assumed to have had

ex dividend day stock price behavior discreteness or tax induced clienteles abstract since prices are constrained to discrete tick multiples while dividends are essentially continuous ex day price changes will not equal dividends we argue that the expected price drop is strictly less than the dividend but within one tick of the dividend the price drop to dividend ratio will i be less than one ii increase with dividends generally and iii decline between tick multiples giving a sawtooth pattern in the data since dividends and dividend yields are highly correlated discreteness will give the impression of tax induced dividend clienteles even if there are none taxable cash dividends and nontaxable stock dividends exhibit similar ex day behavior

dividends taxes and common stock prices the ex dividend day behavior of common stock prices before the income tax this study examines the ex dividend day behavior of common stock prices before the enactment of the federal income tax on ex dividend days during the pre tax period stock prices fell on average by the full amount of the dividend the data are consistent with the hypothesis that i investors in the pre tax period value dividends and capital gains as perfect substitutes and ii the differential taxation of dividends and capital gains has since caused investors to discount the value of taxable cash dividends in relation to capital gains

tax induced trading around ex dividend days abstract this paper investigates trading volume around ex dividend days for taxable distributions cash dividends it is found that trading volume increases significantly around the ex dividend day this increase is more pronounced for high yield actively traded stocks and after brokerage commissions became negotiable the results are consistent with the hypothesis that short term traders have an impact on ex day price behavior at least for taxable distributions for non taxable distributions stock splits and stock dividends we find negative abnormal volume around ex day

some economic determinants of time series properties of earnings abstract the earnings time series literature in accounting focuses on the statistical characteristics of the processes which generate corporate earnings in order to further our understanding of earnings behavior this study investigates the question whether inter firm differences in these statistical characteristics autocorrelations and variances of earnings changes can be explained by economic factors various relationships between economic factors and earnings behavior are derived from the economic literature and examined empirically in this study findings indicate that autocorrelations and variability of annual earnings and earnings over equity changes are systematically associated with the following factors the type of product the height of industry barriers to entry a surrogate for degree of competition the degree of capital intensity operating leverage and the firm size

tax reform and ex dividend day behavior this paper investigates the effect of a major canadian tax reform on the ex dividend day behavior of companies on the toronto stock exchange the results are inconsistent with the hypothesis that price changes on ex dividend days reflect the relative taxation of dividends and capital gains for the representative investor but are consistent with the hypothesis that ex dividend day price behavior reflects short term trading activities

the effect of tax heterogeneity on prices and volume around the ex dividend day evidence from the milan stock exchange to investigate the effect of taxation on stock price and trading volume around the ex dividend day we use the italian stock market where dividends on two classes of stock are taxed differently we find that the weighted average of investors tax rates is reflected in the ex day prices and the variance of the relative tax rate across investors is reflected in the volume of trades we also show that higher transaction costs result in higher ex dividend day excess returns and lower abnormal volume this finding is consistent with profit elimination activity by institutions and corporations article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

labor market discrimination against hispanic and black men h ispanic american men have lower average wage rates than white non hispanics in 1975 the average white non hispanic male wage earner in the united states earned 5 97 an hour mexican men earned 4 31 72 as much as white non hispanics puerto rican men earned 4 52 76 as much and cuban men earned 5 33 89 as much as white non hispanics by way of comparison black men s average wages in 1975 were 4 65 78 of the white male wage several possible reasons for the hispanics lower wages come to mind among them are age and education geographic location immigration language difficulties and discrimination for example as shown in table 1 mexicans and puerto ricans are younger on average than the white non hispanic population and earnings tend to rise with age hispanics have lower average levels of education than white non hispanics and wages are positively associated with education many mexican americans live in the southwest where prices are relatively low moreover hispanics are more likely to be recent immigrants and to lack fluency in english than white non hispanics and so to be at a disadvantage in the labor market in addition there is a widespread belief that hispanics suffer from employment discrimination and cannot obtain the wages that their human capital would command if they were non hispanic whites how much of the wage differentials described above are due to each of these factors and to other inter group differences in wage related characteristics in particular how much impact does labor market discrimination have on the average hispanic man s wage and how does this compare with discrimination against blacks this paper provides answers to these questions a few other efforts have been made to analyze the relative earnings of hispanic and white nonhispanic men using 1960 and 1970 census data fogel 1966 poston and alvirez 1973 poston alvirez and tienda 1976 long 1977 and gwartney and long 1978 we use more recent data from the 1976 survey of income and education this data set enables us to measure wage rates more accurately and to specify the wage function more completely than does the census unlike previous analysts in estimating the wage function we take account of possible selectivity bias due to the distinction between average wage offers and average observed wages thus we hope to obtain a more accurate and up to date measure of labor market discrimination against hispanic men section ii explains the method used to separate the minority white non hispanic wage differential into the portions due to differences in average characteristics and the portion due to differences in unobserved factors and discrimination taking into account the possibility of selectivity bias in the observed wage sample section iii describes the data used in the study and the specification of the wage equation the breakdown of the observed wage differentials into components due to differences in participation in the wage and salary sector local price levels average characteristics and discrimination are presented in section iv section v summarizes our findings and discusses their implications for efforts to improve the economic situation of hispanics in the united states

volatility increases subsequent to nyse and amex stock splits the post split increase in daily returns volatility is less for amex stocks than for nyse stocks the exchange trading location is a significant factor in explaining the volatility shift even after stock price and firm size are considered furthermore when measured on a weekly basis there is no increase in amex stocks returns volatility these results suggest that measurement errors created by bid ask spreads and the 1 8 effect and also one or more of the elements that make the nyse different from the amex explain why the estimated volatility of daily stock returns increases after the ex split date ohlson and penman 1985 provide evidence that nyse stock returns variances increase subsequent to ex stock distribution days for splits of 100 or greater the increase in volatility is independent of the size of the split alnd the post split price seven potential problems that might affect their results are analyzed and rejected 1 ohlson and penman 1985 suggest that the greater post split volatility may be due to the activity of relatively ignorant noisy traders who prefer trading low priced stocks this clientele factor is attributed to black 1986 pg 534 and institutional factors a rather broad category that incorporates measurement problems created by the 1 8 effect and bid ask spreads as possible hypotheses for the post split volatility increase this paper extends ohlson and penman s 1985 analysis to amex stocks exchange listing can serve as a proxy for several real factors that may cause the increase in post split variance many of which are related to the clientele factor and institutional factors cited above if the increase in volatility differs between nyse and amex stocks it will suggest that one or more of the following contributes to the phenomenon

tick size nyse rule 118 and ex dividend day stock price behavior abstract bali and hite 1998 and dubofsky 1992 propose models in which market microstructure effects play a role in the ex dividend day price drop anomaly bali and hite suggest that the anomaly is caused solely by price discreteness while dubofsky suggests that nyse rule 118 is also involved we test these models by examining cum to ex day price drops during the one eighth one sixteenth and decimal tick size regimes while the evidence is qualitatively consistent with dubofsky s predictions neither model is satisfactory in a quantitative sense one of our main empirical findings is that no significant decline was evident in the magnitude of the ex day anomaly after the tick size reduction

dividend taxation in firm valuation new evidence in this paper we develop a residual income model showing how taxes on dividends affect the relative valuation of retained earnings versus contributed equity as well as the value of expected future earnings tests of predictions from our model for a sample of compustat firms from 197594 suggest that overall firm value and the relative valuation weights investors assign to retained earnings contributed equity and current earnings all critically depend on dividend taxes the findings also suggest that investors take a proprietary perspective in valuation and impute an unrecorded shareholder level tax liability on retained earnings the u s tax system subjects retained earnings to dividend taxes upon distribution to shareholders while contributed equity is returned to shareholders as a nontaxable return of capital from the shareholder s proprietary perspective therefore retained earnings should be valued on

gender earnings and the english skill acquisition of hispanic workers in the united states i introduction recently the number of english deficient residents has escalated in the united states according to the 1980 and 1990 decennial censuses individuals aged five years and older whose reported english verbal skills are not well or not at all rose from 4 22 million 2 of the population to 6 67 million 3 this percentage is more pronounced in the public schools according to han et al 1997 over 2 12 million students 5 1 of the 41 62 million public school students in grades k 12 were identified as being limited english proficient lep in the 1993 1994 school year other estimates such as those made by henderson abbott and strang 1993 put the public school lep share at over 6 increases in the lep numbers mirror the growth in the immigrant population as well as the relatively high fertility rates of language minority americans the hispanic and asian pacific islander ethnic groups account for much of this growth as shown by the national research council 1997 hispanics in fact are projected by the u s census bureau 1996 to become this nation s largest racial ethnic minority group in less than a decade policywise the growing lep population raises economic and social questions concerning for example the best schooling programs for children in this group as well as the impact of english proficiency in labor markets answers to some of these questions clearly require detailed and inclusive analyses 1 indeed many social scientists have linked the ability to communicate in english to labor market value and occupational selection 2 the bulk of this research however primarily focuses on men less is known on whether gender differently affects the english proficiency outcomes of language minorities researchers in other social science fields such as stevens 1985 1986 1992 cameron 1992 and ellis 1994 have considered gender disparities with respect to the acquisition of english skills 3 however these investigations have not fully implemented some of the empirical advances made by economists to analyze english proficiency moreover this extant work tends to focus solely on gender related english skill differentials at a single point in time in this study we use recent empirical strategies in the economics field to analyze labor market facets associated with the english skill acquisition of hispanic men and women we also employ a two period analysis that allows us to observe whether gender differences in the accumulation of english skills exist with respect to our previous discussion such knowledge facilitates the design of programs aimed at improving the english fluency of the lep population in particular we first track synthetic cohorts to investigate if the english proficiency acquisition made by hispanic workers during the 1980s varies with respect to gender we then test whether poor english skills differently affect the earnings and occupational sorting of hispanic men and women the 1 1980 and 1990 public use microdata samples pums are utilized in these labor market analyses our findings suggest that english skill procurement varies between hispanic men and women depending on age and schooling location we also find that women face a lower english deficiency earnings penalty that rises more rapidly with education than the penalty obtained by their otherwise similar male peers our occupational selection results parallel this penalty difference where english skills serve as a stronger sorting mechanism for hispanic women than men policy prescriptions from such analyses suggest that male oriented studies overestimate the earnings gains and understate the occupational sorting associated with acquiring english fluency ii english skill acquisition in the labor market our first objective tests whether women acquire english proficiency at a different rate than their male peers all of our empirical work relies on the 1 pums of the 1980 and 1990 u

ex dividend price behavior of common stocks this study examines common stock prices around ex dividend dates such price data usually contain a mixture of observations some with and some without arbitrageurs and or dividend capturers active our theory predicts that such mixing will result in a nonlinear relation between percentage price drop and dividend yield not the commonly assumed linear relation this prediction and another important prediction of theory are supported empirically in a variety of tests marginal price drop is not significantly different from the dividend amount thus over the last several decades one for one marginal price drop has been an excellent average rule of thumb article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

are seasonal anomalies real a ninety year perspective in recent years there has been a proliferation of empirical studies documenting unexpected or anomalous regularities in security rates of return in addition to the widely studied relation between firm size and rate of return 1 these include seasonal regularities related to the time of the day harris 1986 the day of the week see ball and bowers 1986 cross 1973 french 1980 gibbons and hess 1981 jaffe and westerfield 1985 keim and stambaugh 1984 and lakonishok and levi 1982 the time of the month ariel 1987 and the turn of the year see haugen and lakonishok 1988 jones pearce and wilson 1987 lakonishok

an examination of ex dividend day stock price movements the case of nontaxable master limited partnership distributions this study examines the unit stock price and volume behavior of master limited partnerships mlp around the ex dividend day since the dividends of mlps are not taxable to the unitholder tax based hypotheses predict no abnormal unit movements around the ex day significant positive excess returns and volume are found before the ex dividend day and significant negative excess returns are found on the ex dividend day the findings which are not significantly impacted by the tax reform act of 1986 suggest ex day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior elton and gruber s 1970 findings that in 1966 67 stock prices fell on average by less than the amount of the dividend on the ex dividend date and that the ratio of the price decrease to the dividend was correlated with the dividend yield have led to the development of a tax clientele hypothesis relating to investor behavior one puzzling result from their study was the finding that the price decreases for the highest yielding securities were significantly greater than the dividends which in their analysis implied an investor clientele with negative tax rates while michaely 1989 using 1986 87 data was unable to find support for the tax clientele hypothesis across different yield groups he also documented the large price drop for the highest yielding securities michaely 1989 suggested that his results may demonstrate a preference of corporations for dividend over capital gains because of favorable tax treatment corporations receive on dividend income corporate trader hypothesis shefrin and statman 1984 however suggest that preferences for dividends over capital gains may exist for nontax reasons such as self control or a desire to segregate gains and losses the purpose of this paper is to examine the ex dividend day stock price behavior of master limited partnership mlp units during the 1985 88 period dividends from these high yielding securities are not taxable therefore support for either the tax clientele hypothesis or the corporate trader hypothesis would be found only if the average ex day price change on mlps equalled the dividend this result would also be consistent with barclay s 1987 finding that before the enactment of an income tax in 1913 even high

a microstructure analysis of ex dividend stock price behavior before and after the 1984 and 1986 tax reform acts this article extends ex dividend research by explicitly modeling trading at bid and ask quotations this refinement distinguishes between buying and selling for long term investors and short term dividend capture traders it also explicitly incorporates the bid ask spread and eliminates some potential measurement errors that may bias returns marginal conditions are tested during 1983 and 1988 periods that span the 1984 and 1986 tax reform acts results for long term investors are consistent with the elimination of favorable capital gains tax rates at observed prices tax neutral short term traders cannot profit corporate dividend capture traders face profit opportunities during 1983 that disappear by 1988 copyright 1996 by university of chicago press

volume for winners and losers taxation and other motives for stock trading capital gains taxes create incentives to trade our major finding is that turnover is higher for winners stocks the prices of which have increased than for losers which is not consistent with the tax prediction however the turnover in december and january is evidence of tax motivated trading there is a relatively high turnover for losers in december and for winners in january we conclude that taxes influence turnover but other motives for trading are more important we were unable to find evidence that changing the length of the holding period required to qualify for long term capital gains treatment affected turnover investors responding to the tax incentives in the capital gains laws should produce predictable patterns in the volume of trading in a stock but not necessarily in its price this study uses past price patterns as a proxy to measure the incentives to sell or avoid selling a stock and observes trading volumes to estimate the extent to which investors respond to these incentives past price patterns may influence trading volumes for other non tax related reasons as well these are also considered we find that past prices influence current incentives to trade through both tax and non tax motives winners tend to have higher abnormal volumes than losers this would be expected if non tax related motives were predominant however the influence of tax related motives on trading volume is shown by seasonal variations in the relationship between past price changes and turnover as predicted by tax induced trading theories the volume of losers is higher than normal in december and the volume of winners is higher than normal in january we found no evidence that trading volume was affected by changes in the length of the holding period required to qualify for long term capital gains investors reactions to capital gains taxes are important for several reasons first a comprehensive understanding of investor behavior would include both price and volume understanding the relationship between taxes and volume is a fruitful and convenient method of contributing to this subject the resource allocation consequences of capital gains taxes are controversial in part because

cluster sample methods in applied econometrics inference methods that recognize the clustering of individual observations have been available for more than 25 years brent moulton 1990 caught the attention of economists when he demonstrated the serious biases that can result in estimating the effects of aggregate explanatory variables on individual specific response variables the source of the downward bias in the usual ordinary least squares ols standard errors is the presence of an unobserved state level effect in the error term more recently john pepper 2002 showed how accounting for multi level clustering can have dramatic effects on t statistics while adjusting for clustering is much more common than it was 10 years ago inference methods robust to cluster correlation are not used routinely across all relevant settings in this paper i provide an overview of applications of cluster sample methods both to cluster samples and to panel data sets

local amenities and life cycle migration do people move for jobs or fun abstract do households move for jobs or fun and where do they go when they move we address these questions using the 1970 2000 us census based on a panel of quality of life and business environment measures households prefer msas in warm coastal areas and non metropolitan locations while firms prefer large growing cities in addition cities with improving business environments acquire increasing shares of workers especially workers with high levels of human capital cities with improving consumer amenities become relatively more populated by retirees further analysis of individual level migration decisions indicates that regardless of marital status young highly educated households tend to move towards places with higher quality business environments this tendency is especially pronounced among highly educated couples who are more subject to job market co location problems in contrast regardless of education couples near retirement tend to move away from places with favorable business environments and towards places with highly valued consumer amenities these patterns help explain why areas unattractive to both households and business have struggled as with upstate new york while the sun belt and other regions are thriving

beta changes around stock splits revisited recent papers by lamoureux and poon 1987 and brennan and copeland 1988 document a significant permanent increase in average beta subsequent to stock split ex dates this paper demonstrates that the shift in estimated beta following ex dates decays as the measurement interval is lengthened there is no statistically significant difference between pre and post split betas using the scholes williams 1977 estimator and weekly return data or using monthly returns we conclude that lamoureux and poon s and brennan and copeland s results can be attributed to a bias created by using too short a return measurement interval to estimate beta

personal income taxes and the january effect small firm stock returns before the war revenue act of 1917 a note this paper tests the tax explanation of the january effect by examining small firm stock returns before the war revenue act of 1917 no evidence of a turn of the year effect is found this paper also extends previous authors work on the subject to 191829 a january effect is found during that period the large abnormal returns earned by small firm stocks during the first few days of january is attracting considerable attention from financial economists specifically keim 10 shows that over the entire 1963 79 period the average difference between risk adjusted returns of small and large firms is about 0 7 per day during january even more striking is the finding of keim 9 that over the entire 1931 78 period the relation between daily abnormal returns and size is always negative and more pronounced in january than in any other month similarly ibbotson and sinquefield 8 note that the average return on the quintile of nyse stocks with the lowest market values exceeds the return on the standard and poor s corporate index for 50 of the 56 januarys from 1926 81 there is no accepted theory linking the excess returns of small firms in january with the change of the tax year nevertheless the plausibility of a relation between taxes and stock return seasonality has led roll 17 brown et al 6 berges mcconnell and schlarbaum 2 and reinganum 16 among others to investigate personal income taxes as an explanation for the january effect this paper uses a different methodology and reaches stronger conclusions than any of the above papers specifically i examine the returns of small firms for the period from 1900 to 1929 prior to the revenue act of 1917 marginal income tax rates for investors were very low or zero the major finding of this paper is that there is no evidence that small firms earned abnormal returns in january prior to the 1917 tax act i also show that a january effect does appear during the years 1918 29 therefore i cannot reject a tax explanation for the january effect

taxes and corporate policies evidence from a quasi natural experiment we document important interactions between tax incentives and corporate policies using a quasi natural experiment provided by a surprise announcement that imposed corporate taxes on a group of canadian publicly traded firms the announcement caused a dramatic decrease in value prospective tax shields partially offset the losses adding 4 6 to firm value on average and vary with the tax status of the marginal investor further firms adjust leverage payout cash holdings and investment in response to changing tax incentives overall the event study and time series evidence supports the view that taxes are important for corporate decision making

unaffordable housing and local employment growth evidence from california municipalities it is widely believed that unaffordable housing could drive businesses away and thus impede job growth however there is little evidence to support this view this paper presents a simple model to clarify how housing affordability is linked to employment growth and why unaffordable housing could negatively affect employment growth the paper then investigates this effect empirically using data on california municipalities for various reasons a simple correlation between unaffordable housing and employment growth cannot be interpreted as causal several empirical strategies are employed to identify the causal effect of unaffordable housing on employment growth the estimation results provide consistent evidence that unaffordable housing indeed slows local employment growth

ex dividend day trading who how and why evidence from the finnish market abstract this study examines the ex dividend day trading behavior of all investors in the finnish stock market consistent with dynamic dividend clientele theories investors with a preference for dividend income buy shares cum dividend and sell ex dividend the reverse is true for investors with the opposite preference investors also engage in overnight arbitrage earning on average a 2 overnight return on their invested capital trades at the investor level reveal that idiosyncratic risk is an important determinant in the choice of stock for short term ex day trading furthermore transaction costs and dividend yield jointly determine whether the volume of short term trading activity is nonzero