An analysis of the market reaction on ex-dividend days : the case of the Athens Stock Exchange

Abstract

The objective of this study is the investigation of the ex-dividend day stock price behaviour in a
unique institutional environment where there are neither taxes on dividends nor on capital gains,
tick size is very small, dividends are distributed annually and the corporate law designates the
minimum dividend amount paid. This is the Greek capital market. Like previous studies, we find
that the stock price fall by less than the dividend amount and there is a significant positive return
on the ex-dividend day. Consistent with the predictions of the short-term trading hypothesis, the
results from the cross-sectional regression analysis display that the ex-day abnormal returns are
significantly affected by the systematic risk, the dividend yield and transaction costs.