attention effect on the ex date: evidence from taiwan
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Attention effect on the ex date: Evidence from Taiwan. Shing-yang Hu and Yun-lan Tseng. Motivation. Ex-dividend day phenomenon Stock returns are significantly positive Campbell and Beranek (1955); Durand and May (1960). Observed in many countries - PowerPoint PPT PresentationTRANSCRIPT
Attention effect on the ex date: Evidence from Taiwan
Shing-yang Huand
Yun-lan Tseng
Motivation Ex-dividend day phenomenon
Stock returns are significantly positive Campbell and Beranek (1955); Durand and May (19
60). Observed in many countries
Kato and Lowenstein (1995); Frank and Jagannathan (1998)
Observed for various distributions- cash dividends, stock dividends, and stock splits
Eades, Hess, and Kim (1984)
Motivation - Literature
Tax Elton and Gruber (1970)
Microstructure Bali and Hite (1998); Dubofsky (1992)
Small investor preference Black (1986); Lakonishok and Lev (1987)
Contribution – New interpretation
1. Attention paid to ex dates Higher publicity
Company announcement, Stock exchange Brokerage houses and newspapers reports
2. Attract a higher demand from small investors to push up the price
3. High attention stocks gets more purchase from small investors
Contribution – New evidence
Provide cross-sectional evidence that, on ex dates, high attention stocks have
More newspaper reports (publicity) More purchase from small investors High returns
Contribution – New evidence
Measures of attention Distribution rate Turnover
Six-month period before the ex date Market-to-book value of equity Growth in the number of small
shareholders
Contribution – New evidence
Provide the direct link between repots, small investors purchase, and ex-date returns
Data - Sample 1999 to 2005 All stock dividend distributions from
companies listed on the Taiwan Stock Exchange (398) Includes nontaxable (138), taxable
(123), and mixed distributions (137) Excludes distributions that are
combined with a cash dividend, a rights offering, or an employee stock bonus
Data – Media reports
Search for the keyword “ex dividend” in the InfoTimes database. Covers news reported by the China Times
Group Newspapers report 70 (less than 20%)
events over the period -9 to 0 40 ex dates are reported
Data – Order imbalance of small investors
Definition of small investors Daily order value < NT$200,000
Definition of order imbalance (buy-sell)/(buy+sell)
Aggressive orders For orders submitted before the market opens
Buy (sell) order is aggressive if its limit price is higher (lower) than the closing price of the previous day adjusted for the distribution.
For orders that arrive after the opening Buy orders is aggressive if its limit price is higher than the pr
evailing best ask Sell order is aggressive if its limit price is lower than the best
bid
Data – Standardized abnormal order imbalance
ijtmjtijijijt uOO , t = -50,…,-6,
mjtijijijtijt OOAO ˆˆ
ijt
ijtijt AO
AOSAO
Data – abnormal return , t = -50,…,-6.
mtiiitit RRAR ˆˆ
mtiiitit RRAR ˆˆ mtiiitit RRAR ˆˆ
itmtiiit uRR
Results – Media reports Linear probability model
(1) (2) (3)
0.094*** 0.104*** 0.078** Intercept
(0.035) (0.036) (0.039)
0.007** 0.006* Distribution rate
(0.003) (0.003)
0.017 0.011 0.013 Turnover
(0.018) (0.019) (0.018)
0.044* 0.024 Market-to-book value
(0.024) (0.026)
0.017 0.021 0.018 Growth of small shareholder
(0.016) (0.016) (0.016)
Results – Small investor OIB
0.050 0.135 0.228* 0.025 Intercept
(0.102) (0.105) (0.099) (0.109)
0.003 0.020** 0.005 Distribution rate
(0.008) (0.008) (0.008)
0.172*** 0.225*** 0.174*** Turnover
(0.052) (0.051) (0.052)
0.320*** 0.358*** 0.301*** Market-to-book value (0.066) (0.071) (0.072)
0.123*** 0.124*** 0.111** 0.120*** Growth of small shareholder (0.044) (0.045) (0.045) (0.044)
R2 0.119 0.094 0.081 0.120
Results – Abnormal return
Full sample
(N=398)
Taxable
sample
(N=123)
Nontaxable
sample
(N=138)
0.354 0.297 0.139 -0.144 0.637 Intercept
(0.270) (0.275) (0.288) (0.515) (0.515)
0.044** 0.046** 0.067* 0.045 Distribution rate
(0.022) (0.022) (0.039) (0.050)
0.230* 0.250* 0.158 0.117 Turnover
(0.137) (0.137) (0.214) (0.235)
0.483*** 0.396** 0.314 0.280 -0.171 Market-to-book value (0.175) (0.187) (0.192) (0.321) (0.404)
0.187 0.166 0.159 0.275 0.531* Growth of small shareholder (0.117) (0.118) (0.118) (0.207) (0.278)
R2 0.039 0.042 0.050 0.077 0.038
Connections between attention and return
Et-1(rit) = a Et-1(Ait)
Et-1(rit) = b1 DISTi + b2 TURNi + b3 M/Bi + b4 SSHi
Et-1(Ait) = c1 DISTi + c2 TURNi + c3 M/Bi + c4 SSHi
4
4
3
3
2
2
1
1
c
b
c
b
c
b
c
b
Overidentifying restrictions
E[DISTi(ri – aAi)] = E[TURNi(ri – aAi)] = E[M/Bi(ri – aAi)] = E[SSHi(ri – aAi)] = 0.
Nonlinear restrictions
Results – Connection (1) (2) (3) (4) (5)
Intercept 0.191
(0.288)
-0.651
(0.880)
-0.390
(0.777)
0.288
(0.385)
-0.151
(0.374) Small investor order imbalance
1.554***
(0.446)
0.681
(1.024)
1.282***
(0.491)
Media coverage 10.915**
(4.965)
6.731
(7.343)
Large investor order imbalance
3.794***
(1.315)
2.178
(1.497) Test of overidentifying restrictions
1.845 0.354 0.136 6.835* 0.305
Test of nonlinear restrictions
1.680 0.310 0.110 4.120 0.210
Results – Institution OIB
0.100 0.067 -0.015 0.087 Intercept
(0.104) (0.106) (0.099) (0.111)
0.003 -0.004 0.003 Distribution rate
(0.008) (0.008) (0.008)
-0.033 -0.058 -0.032 Turnover
(0.052) (0.051) (0.052)
-0.139** -0.161** -0.150** Market-to-book value (0.068) (0.072) (0.074)
-0.024 -0.026 -0.022 -0.025 Growth of small shareholder (0.044) (0.045) (0.045) (0.045)
R2 0.016 0.015 0.005 0.016
Results – Large investor OIB
0.201* 0.150 0.086 0.125 Intercept
(0.090) (0.091) (0.086) (0.096)
0.016** 0.014** 0.016** Distribution rate
(0.007) (0.007) (0.007)
0.032 0.030 0.039 Turnover
(0.046) (0.044) (0.046)
0.002 -0.045 -0.058 Market-to-book value (0.058) (0.062) (0.064)
0.028 0.019 0.020 0.018 Growth of small shareholder (0.039) (0.039) (0.039) (0.039)
R2 0.003 0.014 0.014 0.016
Results – Large investor OIB
Taxable distributions
(N=123)
Nontaxable distributions
(N=138)
0.057 -0.168 -0.048 0.115 0.116 0.113 Intercept
(0.167) (0.141) (0.170) (0.161) (0.165) (0.185)
0.023* 0.030** 0.001 0.0004 Distribution rate
(0.012) (0.013) (0.017) (0.018)
0.063 0.072 0.078 0.031 0.032 0.031 Turnover
(0.072) (0.071) (0.071) (0.084) (0.078) (0.084)
-0.034 -0.134 0.005 0.004 Market-to-book value (0.099) (0.106) (0.138) (0.145)
-0.033 -0.067 -0.072 0.114 0.114 0.113 Growth of small shareholder (0.068) (0.069) (0.069) (0.099) (0.099) (0.100)
R2 0.009 0.039 0.052 0.013 0.013 0.013
Results – Small investor OIB
Taxable distributions
(N=123)
Nontaxable distributions
(N=138)
0.476*** 0.352** 0.387** 0.052 0.184 -0.024 Intercept
(0.180) (0.152) (0.185) (0.149) (0.157) (0.171)
0.023* 0.025* 0.028* 0.015 Distribution rate
(0.013) (0.014) (0.016) (0.017)
0.185** 0.196** 0.198** 0.118 0.200*** 0.122 Turnover
(0.077) (0.076) (0.077) (0.078) (0.074) (0.078)
0.045 -0.039 0.405*** 0.369*** Market-to-book value (0.106) (0.116) (0.129) (0.134)
0.121* 0.090 0.089 0.168* 0.176* 0.163* Growth of small shareholder (0.073) (0.074) (0.074) (0.092) (0.095) (0.093)
R2 0.070 0.093 0.094 0.155 0.113 0.160
Results – Alternative hypothesis
Taxable
sample
(N=471)
Non-
taxable
sample
(N=351)
Exact tick-multiple
sample
(N=250)
Full sample
(N=1525)
(1) (2) (3) (4) (5) (6)
0.608*** 0.000 0.563** 0.858*** 0.613 0.617 Intercept
(0.192) (0.249) (0.266) (0.239) (0.499) (0.498)
0.041*** 0.070*** 0.042** 0.041*** 0.042*** Distribution rate
(0.013) (0.022) (0.017) (0.008) (0.007)
0.196* 0.111 0.393** 0.418** 0.228*** 0.230*** Turnover
(0.103) (0.123) (0.166) (0.167) (0.061) (0.060)
-0.087* 0.147 0.021 0.131*** 0.010 Market-to-book value (0.052) (0.095) (0.064) (0.046) (0.051)
0.063 0.120 -0.167 -0.174* 0.004 0.004 Growth of small shareholder (0.069) (0.132) (0.103) (0.104) (0.043) (0.043)
0.000 0.000 Price level
(0.004) (0.002)
-0.014 -0.014 Size
(0.057) (0.057)
R2 0.034 0.067 0.097 0.075 0.047 0.047
Results – Annual regression
(1) (2) (3) (4)
Intercept 0.702***
(0.217)
0.906***
(0.168)
0.799***
(0.155)
0.786***
(0.149)
Turnover 0.000
(0.001)
0.001*
(0.0006)
-0.0002
(0.0007)
Market-to-book value
0.018
(0.015)
-0.010
(0.018)
-0.002
(0.016)
Price-to-earning 0.010**
(0.004)
0.008**
(0.004)
0.008***
(0.003)
Market return 0.005**
(0.002)
0.004**
(0.002)
0.004*
(0.002)
R2 0.494 0.464 0.570 0.568