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Dividend Yield (dividend + yield)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Finance & Investments	41%
General & Introductory Economics	16%
Financial Accounting	12%

Selected Abstracts

Managing Stock Option Expense: The Manipulation of Option-Pricing Model Assumptions,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2006
Derek Johnston
Abstract This paper examines whether firms that voluntarily recognize stock option expense in their financial statements manage that expense downward more than firms that do not recognize the expense by adjusting option-pricing model assumptions. To examine this issue, I collect option-pricing model assumptions from fiscal year 2002 for both a sample of firms that voluntarily recognize stock option expense ("recognizing firms") and a sample of control firms that do not ("disclosing firms"). The empirical results suggest that recognizing firms manage the recognized stock-based compensation expense reported in their financial statements downward more than do firms that only disclose the expense. Additional analyses reveal that recognizing firms assume a lower level of volatility than disclosing firms in the option-pricing model calculations; however, I find no evidence that recognizing firms manage the dividend yield and risk-free interest rate assumptions more than disclosing firms. The Financial Accounting Standards Board (FASB) recently issued Statement of Financial Accounting Standards No. 123(R), which requires the expensing of the fair value of stock options, so these results may be of interest to capital-market participants and the FASB as they assess the reliability of stock option expense as determined by option-pricing models. [source]

Shareholder Income Taxes and the Relation between Earnings and Returns,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2005
DAN S. DHALIWAL
Abstract The purpose of this study is to investigate whether and how shareholder-level taxes affect earnings response coefficients (ERCs). Our tests indicate that when the tax rate on dividends increases, ERCs decrease for firms with high levels of dividend yield and whose marginal investor is likely to be an individual. For firms with high levels of share repurchase yield and whose marginal investor is likely to be an individual, an increase in dividend tax rate has no discernible effect on ERCs. These results are consistent with the notion that the tax penalty on dividends, relative to capital gains, reduces the earnings-return relation. [source]

The Interest Rate Risk Exposure of Financial Intermediaries: A Review of the Theory and Empirical Evidence

FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 4 2003
By Sotiris K. Staikouras
The paper surveys current and previous research on financial institutions' interest rate risk exposure. The implications of such exposure are discussed and motivating insights are emphasized. Various theoretical frameworks and models are presented. For each one an overview of the studies and any relationship to each other is provided. In a cross-industry analysis, other idiosyncratic risk factors are considered and their importance is delineated. A number of empirical relations are established. More specifically, there is an inverse relationship between interest rate changes and common stock returns of financial institutions. The intermediaries' apparent yield sensitivity is mainly attributed to the duration gap inherent in their balance sheet structure. Furthermore, the aforesaid equity sensitivity due to other possible dynamics such as dividend yield, unanticipated inflation and regulatory lags is also considered. Changes in economic regimes have altered volatility in market yields with a subsequent effect, positive or negative, on financial intermediaries' equity returns. The issue of the risk-return compensation is further analyzed, and findings suggest that the interest rate risk is priced by capital markets. Finally, a few other issues are identified as avenues for future research. [source]

Capital gains tax and the capital asset pricing model

ACCOUNTING & FINANCE, Issue 2 2003
Martin Lally
Abstract This paper develops a version of the Capital Asset Pricing Model that views dividend imputation as affecting company tax and assumes differential taxation of capital gains and ordinary income. These taxation issues aside, the model otherwise rests on the standard assumptions including full segmentation of national capital markets. It also treats dividend policy as exogenously determined. Estimates of the cost of equity based on this model are then compared with estimates based on the version of the CAPM typically applied in Australia, which differs only in assuming equality of the tax rates on capital gains and ordinary income. The differences between the estimates can be material. In particular, with a high dividend yield, allowance for differential taxation can result in an increase of two to three percentage points in the estimated cost of equity. The overall result obtained here carries over to a dividend equilibrium, in which firms choose a dividend policy that is optimal relative to the assumed tax structure. [source]

Dividend Taxes and Implied Cost of Equity Capital

JOURNAL OF ACCOUNTING RESEARCH, Issue 5 2005
DAN DHALIWAL
ABSTRACT We estimate firm-level implied cost of equity capital based on recent advances in accounting and finance research and examine the effect of dividend taxes on the cost of equity capital. We investigate whether dividend taxes affect firms' cost of capital by testing the relation between the implied cost of equity capital and a measure of the tax-penalized portion of dividend yield, which we define as the product of dividend yield and the dividend tax penalty. The results generally support the dividend tax capitalization hypothesis. We find a positive relation between the implied cost of equity capital and the tax-penalized portion of dividend yield that is decreasing in aggregate institutional ownership, our proxy for tax-advantaged investors. The evidence in this study adds to the understanding of the effect of investor-level taxes on equity value. [source]

The Gilt-Equity Yield Ratio and the Predictability of UK and US Equity Returns

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 3-4 2000
Richard D.F. Harris
A number of financial variables have been shown to be effective in explaining the time-series of aggregate equity returns in both the UK and the US. These include, inter alia, the equity dividend yield, the spread between the yields on long and short government bonds, and the lagged equity return. Recently, however, the ratio between the long government bond yield and the equity dividend yield , the gilt-equity yield ratio , has emerged as a variable that has considerable explanatory power for UK equity returns. This paper compares the predictive ability of the gilt-equity yield ratio with these other variables for UK and US equity returns, providing evidence on both in-sample and out-of-sample performance. For UK monthly returns, it is shown that while the dividend yield has substantial in-sample explanatory power, this is not matched by out-of sample forecast accuracy. The gilt-equity yield ratio, in contrast, performs well both in-sample and out-of-sample. Although the predictability of US monthly equity returns is much lower than for the UK, a similar result emerges, with the gilt-equity yield ratio dominating the other variables in terms of both in-sample explanatory power and out-of-sample forecast performance. The gilt-equity yield ratio is also shown to have substantial predictive ability for long horizon returns. [source]

Forecasting UK industrial production over the business cycle

JOURNAL OF FORECASTING, Issue 6 2001
Paul W. Simpson
Abstract This paper examines the information available through leading indicators for modelling and forecasting the UK quarterly index of production. Both linear and non-linear specifications are examined, with the latter being of the Markov-switching type as used in many recent business cycle applications. The Markov-switching models perform relatively poorly in forecasting the 1990s production recession, but a three-indicator linear specification does well. The leading indicator variables in this latter model include a short-term interest rate, the stock market dividend yield and the optimism balance from the quarterly CBI survey. Copyright © 2001 John Wiley & Sons, Ltd. [source]

PRICING AND HEDGING AMERICAN OPTIONS ANALYTICALLY: A PERTURBATION METHOD

MATHEMATICAL FINANCE, Issue 1 2010
Jin E. Zhang
This paper studies the critical stock price of American options with continuous dividend yield. We solve the integral equation and derive a new analytical formula in a series form for the critical stock price. American options can be priced and hedged analytically with the help of our critical-stock-price formula. Numerical tests show that our formula gives very accurate prices. With the error well controlled, our formula is now ready for traders to use in pricing and hedging the S&P 100 index options and for the Chicago Board Options Exchange to use in computing the VXO volatility index. [source]

Miller and Modigliani, Predictive Return Regressions and Cointegration,

OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 2 2008
Piergiorgio Alessandri
Abstract This paper investigates the use of alternative measures of dividend yields to predict US aggregate stock returns. Following Miller and Modigliani [Journal of Business (1961), Vol. 34, pp. 411,433] we construct a cashflow yield that includes both dividend and non-dividend cashflows to shareholders. Using a data set covering the course of the 20th century, we show in a cointegrating vector autoregression framework that this measure has strong and stable predictive power for returns. The weak predictive power of standard measures of the dividend yield is explained by the strong rejection of the implied cointegrating and causality restrictions on the impact of non-dividend cashflows. [source]

The Liquidity of Property Shares: An International Comparison

REAL ESTATE ECONOMICS, Issue 3 2009
Dirk Brounen
This article investigates the magnitude and determinates of share liquidity over the 1990,2007 period in the world's four largest securitized real estate markets: the United States, the United Kingdom, Continental Europe and Australia. We document a significant and consistent role for market capitalization, nonretail share ownership and dividend yield as drivers of liquidity across markets. We also document significant differences in liquidity across countries and between property and nonproperty companies. Also striking is the lack of correlation among our three measures of liquidity across property firms and time. This supports the notion that share price liquidity is multifaceted and therefore reliance on any one measure of liquidity in empirical work may produce misleading conclusions. Although we find some evidence of a connection between liquidity and firm value, it is less conclusive than prior studies. [source]

The Ex,Dividend Pricing of REITs

REAL ESTATE ECONOMICS, Issue 4 2002
William G. Hardin III
Past studies have shown that ex,dividend stock prices are not fully reflective of dividend payments. A tax,induced clientele effect and micromarket limitations in stock pricing have been used to explain this pricing anomaly. This study focuses on the ex,dividend behavior of real estate investment trusts (REITs). Due to a low correlation between dividend size and dividend yield, REITs permit a cleaner examination of a tax,induced clientele effect. The results indicate that tick constraints in pricing ex,dividend stocks create the appearance of a tax,induced clientele effect in REITs when none should exist. [source]

On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing

THE JOURNAL OF FINANCE, Issue 2 2007
JACOB BOUDOUKH
ABSTRACT We investigate the empirical implications of using various measures of payout yield rather than dividend yield for asset pricing models. We find statistically and economically significant predictability in the time series when payout (dividends plus repurchases) and net payout (dividends plus repurchases minus issuances) yields are used instead of the dividend yield. Similarly, we find that payout (net payout) yields contains information about the cross section of expected stock returns exceeding that of dividend yields, and that the high minus low payout yield portfolio is a priced factor. [source]

Consumption, Aggregate Wealth, and Expected Stock Returns

THE JOURNAL OF FINANCE, Issue 3 2001
Martin Lettau
This paper studies the role of fluctuations in the aggregate consumption,wealth ratio for predicting stock returns. Using U.S. quarterly stock market data, we find that these fluctuations in the consumption,wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill rate. We also find that this variable is a better forecaster of future returns at short and intermediate horizons than is the dividend yield, the dividend payout ratio, and several other popular forecasting variables. Why should the consumption,wealth ratio forecast asset returns? We show that a wide class of optimal models of consumer behavior imply that the log consumption,aggregate wealth (human capital plus asset holdings) ratio summarizes expected returns on aggregate wealth, or the market portfolio. Although this ratio is not observable, we provide assumptions under which its important predictive components for future asset returns may be xpressed in terms of observable variables, namely in terms of consumption, asset holdings and labor income. The framework implies that these variables are cointegrated, and that deviations from this shared trend summarize agents' expectations of future returns on the market portfolio. [source]

Black-Scholes-Merton revisited under stochastic dividend yields

THE JOURNAL OF FUTURES MARKETS, Issue 7 2006
Abraham LiouiArticle first published online: 9 MAY 200
European options are priced in a framework à la Black-Scholes-Merton, which is extended to incorporate stochastic dividend yield under a stochastic mean,reverting market price of risk. Explicit formulas are obtained for call and put prices and their Greek parameters. Some well-known properties of the Black-Scholes-Merton formula fail to hold in this setting. For example, the delta of the call can be negative and even greater than one in absolute terms. Moreover, call prices can be a decreasing function of the underlying volatility although the latter is constant. Finally, and most importantly, option prices highly depend on the features of the market price of risk, which does not need to be specified at all in the standard Black-Scholes-Merton setting. The results are simulated in order to assess the economic impact of assuming that the dividend yield is deterministic when it is actually stochastic, as well as to assess the economic importance of the features of the market price of risk. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:703,732, 2006 [source]

The Impact of Macroeconomic and Financial Variables on Market Risk: Evidence from International Equity Returns

EUROPEAN FINANCIAL MANAGEMENT, Issue 4 2002
Dilip K. Patro
Using a GARCH approach, we estimate a time,varying two,factor international asset pricing model for the weekly equity index returns of 16 OECD countries. We find significant time,variation in the exposure (beta) of country equity index returns to the world market index and in the risk,adjusted excess returns (alpha). We then explain these world market betas and alphas using a number of country,specific macroeconomic and financial variables with a panel approach. We find that several variables including imports, exports, inflation, market capitalisation, dividend yields and price,to,book ratios significantly affect a country's exposure to world market risk. Similar conclusions are obtained by using lagged explanatory variables, and thus these variables may be useful as predictors of world market risks. Several variables also significantly impact the risk,adjusted excess returns over this time period. Our results are robust to a number of alternative specifications. We further discuss some economic hypotheses that may explain these relationships. [source]

The Value of Imputation Tax Credits on Australian Hybrid Securities

INTERNATIONAL REVIEW OF FINANCE, Issue 3 2010
CLINTON FEUERHERDT
ABSTRACT Hybrid securities are becoming an increasingly important component of the capital structure of Australian firms. While displaying characteristics of both debt and equity, one principal equity attribute of hybrids is their ability to pay franked dividends. This enables resident domestic investors to claim corporate tax payments as a credit against personal tax obligations under Australia's dividend imputation tax system. This paper estimates a value for the ,franking credits' that attach to hybrid securities by examining stock price changes around ex-dividend dates. We add to the literature that examines the ex-day price changes of ordinary shares (OS) in that the hybrid securities we examine have high dividend yields and are relatively insensitive to market movements. Therefore the signal-to-noise ratio is much higher than for OS. Our analysis reveals that cum-dividend day prices on hybrid securities do not include any value for franking credits. This result is consistent with the notion that the price-setting investor in the Australian market is a foreign investor who places no value on franking credits. [source]

Price and Volume Behavior around the Ex-dividend Day: Evidence on the Value of Dividends from American Depositary Receipts and their Underlying Australian Stocks,

INTERNATIONAL REVIEW OF FINANCE, Issue 1-2 2008
AELEE JUN
ABSTRACT Australian residents are tax-advantaged, relative to American investors, in their access to imputation tax credits on Australian stocks. This paper provides evidence consistent with a difference in dividend valuations between Australian stocks and their American Depositary Receipts (ADRs). The ex-dividend drop-off ratio is lower for ADRs relative to their underlying Australian stocks and this difference is most pronounced for stocks that have imputation tax credits and high dividend yields. Consistent with dividend capture trading in the Australian market, the difference in drop-off ratios is driven by both temporarily higher Australian cum-prices and temporarily lower Australian ex-prices. Abnormal trading volume about the ex-day is present in both markets and in the Australian market the abnormal volume is greater for dividends with imputation tax credits. Dividend-related trading leads to price differences across the markets on the ex-dividend day. Price differences are also observed when the stock and the ADR trade with different dividend entitlements due to different ex-dividend dates. [source]

Miller and Modigliani, Predictive Return Regressions and Cointegration,

On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing

Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles

THE JOURNAL OF FINANCE, Issue 4 2004
Ravi Bansal
ABSTRACT We model consumption and dividend growth rates as containing (1) a small long-run predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin's (1989) preferences, can explain key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better long-run growth prospects raise equity prices. The model can justify the equity premium, the risk-free rate, and the volatility of the market return, risk-free rate, and the price,dividend ratio. As in the data, dividend yields predict returns and the volatility of returns is time-varying. [source]

Black-Scholes-Merton revisited under stochastic dividend yields

A Comparison of the Statistical Properties of Financial Variables in the USA, UK and Germany over the Business Cycle

THE MANCHESTER SCHOOL, Issue 4 2000
Elena Andreou
This paper presents business cycle stylized facts for the US, UK and German economies. We examine whether financial variables (interest rates, stock market price indices, dividend yields and monetary aggregates) predict economic activity over the business cycle, and we investigate the nature of any non-linearities in these variables. Leading indicator properties are examined using cross-correlations for both the values of the variables and their volatilities. Our results imply that the most reliable leading indicator across the three countries is the interest rate term structure, although other variables also appear to be useful for specific countries. The volatilities of financial variables may also contain predictive information for production growth as well as production volatility. Non-linearities are uncovered for all financial series, especially in terms of autoregressive conditional heteroscedasticity effects. Strong evidence of mean non-linearity is also found for many financial series and this can be associated with business cycle asymmetries in the mean. This is the case for a number of American and British financial variables, especially interest rates, but the corresponding evidence for Germany is confined largely to the real long-term rate of interest. [source]