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Article: Ex-Day Returns of Stock Distributions: An Anchoring Explanation

TitleEx-Day Returns of Stock Distributions: An Anchoring Explanation
Authors
Issue Date2017
PublisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.org
Citation
Management Science, 2017 How to Cite?
AbstractWe offer a new anchoring explanation for the ex-day abnormal returns of stock distributions including stock dividend distributions, splits, and reverse splits. We propose that investors tend to anchor on cum-day prices in valuating ex-distribution stocks, resulting in a positive association between ex-day returns and adjustment factors. We find that this positive return-factor relation exists for all three types of stock distributions and in both the pre- and post-decimalization periods. Furthermore, we find that this positive return-factor relation is more pronounced among events that are more subject to investors’ anchoring propensity, featured by less investor attention, greater arbitrage difficulty, greater valuation uncertainty, less investor sophistication, and higher market sentiment. Lastly, using brokerage account data, we show that stocks that are traded by investors with more investment experience demonstrate a weaker return-factor relation.
Persistent Identifierhttp://hdl.handle.net/10722/243215
ISSN
2017 Impact Factor: 3.544
2015 SCImago Journal Rankings: 4.384

 

DC FieldValueLanguage
dc.contributor.authorChang, EC-
dc.contributor.authorLin, TC-
dc.contributor.authorLuo, Y-
dc.contributor.authorRen, J-
dc.date.accessioned2017-08-25T02:51:44Z-
dc.date.available2017-08-25T02:51:44Z-
dc.date.issued2017-
dc.identifier.citationManagement Science, 2017-
dc.identifier.issn0025-1909-
dc.identifier.urihttp://hdl.handle.net/10722/243215-
dc.description.abstractWe offer a new anchoring explanation for the ex-day abnormal returns of stock distributions including stock dividend distributions, splits, and reverse splits. We propose that investors tend to anchor on cum-day prices in valuating ex-distribution stocks, resulting in a positive association between ex-day returns and adjustment factors. We find that this positive return-factor relation exists for all three types of stock distributions and in both the pre- and post-decimalization periods. Furthermore, we find that this positive return-factor relation is more pronounced among events that are more subject to investors’ anchoring propensity, featured by less investor attention, greater arbitrage difficulty, greater valuation uncertainty, less investor sophistication, and higher market sentiment. Lastly, using brokerage account data, we show that stocks that are traded by investors with more investment experience demonstrate a weaker return-factor relation.-
dc.languageeng-
dc.publisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.org-
dc.relation.ispartofManagement Science-
dc.titleEx-Day Returns of Stock Distributions: An Anchoring Explanation-
dc.typeArticle-
dc.identifier.emailChang, EC: ecchang@business.hku.hk-
dc.identifier.emailLin, TC: chunlin@hku.hk-
dc.identifier.authorityChang, EC=rp01050-
dc.identifier.authorityLin, TC=rp01077-
dc.description.naturepostprint-
dc.identifier.doi10.1287/mnsc.2017.2843-
dc.identifier.hkuros274167-
dc.publisher.placeUnited States-

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