The Ex‐dividend Day Behaviour of REITs: Tax or Market Microstructure Effects. (June 2016)

• Record Type: Journal Article
• Authors: John, Kose; Mateti, Ravi S.; Nguyen, Duong; Vasudevan, Gopala
• Is Part Of: European financial management. Volume 22:Number 3(2016:Jun.)
• Page Start: 341
• Page End: 366
• Publication Date: 2016-06
• Subjects: ex‐dividend day behaviour -- tax effects -- market microstructure effects -- tick size era -- REITs; Finance -- European Union countries -- Periodicals; International finance -- Periodicals; Corporations -- European Union countries -- Finance -- Periodicals; 332.094
• DOI: 10.1111/eufm.12093
• Languages: English
• ISSNs: 1354-7798

Abstract

Abstract: We examine the importance of the tax and microstructure theories in explaining the ex‐dividend day behaviour of US REIT stock prices in three tick size regimes − the 1/8 th, 1/16 th, and decimal eras. We present a new theory that shows how the tax and microstructure effects interact to produce the observed ex‐dividend day behaviour. Our theory also shows why in an era of a large tick size, as in the 1/8 th era, the tax effects fail to get detected and the observed ex‐dividend day behaviour could be misinterpreted as resulting solely from the microstructure effects.