On the Valuation Effect in Ex-Dividend Day Anomalies： Evidence from Trading Volumes in Taiwan Stock Market 

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Abstract:

For the past 60 years, many literatures documented the ex-dividend day anomalies and expounded these anomalies based on three hypotheses: the tax effect hypothesis, the short-term trading hypothesis, and the dynamic dividend clientele hypothesis. Different from those literatures, this study tries to verify whether valuation effect exists on ex-dividend day trading volumes. We demonstrate that price-to-book ratio of stock will change after distributions of cash dividends and derive two hypotheses. To test the hypotheses, we use cash dividend events and stock dividend events in Taiwan stock market as samples. The empirical evidence suggests that there is valuation effect on trading volumes for cash dividend events on ex-dividend days, and that there is no such effect for stock dividend events as expected. Our findings provide a new explanation for ex-dividend day anomalies on trading volumes. Keywords: ex-dividend day trading volume anomaly, price-to-book ratio, valuation effect, dividend yield.