Published Tue, 17 Sep 2019 09:28:11 -0400 on Seeking Alpha
There exists a price anomaly where the stock price would recover after the drop on the ex-dividend date. This recovery effect varies by holding period, and holding the stock longer (from 1 week to 4 weeks) produced a larger return with the same dispersion of returns. This anomaly is also exists after hedging with the SPY, showing the same pattern of increased returns for a longer holding period, with the same dispersion of returns.
Hedged returns can be considered as the stock outperforming the overall market, but there is no relationship between the stock's beta and the returns. This suggests that this price anomaly is a source of alpha.
Are there so many price anomalies around dividends?
I have previously written about 2 price anomalies around dividends: the price tends to rise between declaration date and ex-dividend date, and ex-dividend date price drop tends to be less than the dividend amount. There are anecdotes of yet another price anomaly a little further down the timeline, which is after the ex-dividend date price drop (or rise, if that happened). This is a curious little anomaly which I have not observed in my own trading, but have only seen mentioned about in various sites, and it is only mentioned in passing without much detail provided.
While my article on dividend stripping (or dividend capture, if you prefer the term) tried to isolate the price anomaly to only the overnight price drop, I also noted that there were other variations... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND||16.50||0.0||0.00||0.00||7.31|
|SPDR S&P DIVIDEND ETF||103.80||0.0||0.00||2.42||2.36|
|VANGUARD DIVIDEND APPRECIATION ETF||120.84||0.0||0.00||0.00||1.58|
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