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This question asks whether stock prices really go down by the amount of the dividend on the day you need to own it to receive the dividend (ex-date). It has two answers:

  1. The accepted answer explains theoretically why it should happen. However as we know, because something should happen in economics doesn't mean it does.
  2. The second answer rather offhandedly gives you a Google search term to use to confirm it yourself. I used the search term and did not find evidence to back up the assertion.

So:

Are there actual studies that show that this is the case, or is it something that is assumed to be true?

N.B If you want to post answers consisting of explanations of why it should be true, or offer search terms, feel free to add them to the other question.

Community
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DJClayworth
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3 Answers3

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Ex-Dividend Price Behavior of Common Stocks would be a study from the Federal Reserve Bank of Minneapolis and University of Minnesota if you want a source for some data.

Abstract

This study examines common stock prices around ex-dividend dates. Such price data usually contain a mixture of observations - some with and some without arbitrageurs and/or dividend capturers active. Our theory predicts such mixing will result in a nonlinear relation between percentage price drop and dividend yield - not the commonly assumed linear relation. This prediction and another important prediction of theory are supported empirically. In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop have been an excellent (average) rule of thumb.

JB King
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Here is one study http://rfs.oxfordjournals.org/content/7/4/711.short

I quote from the abstract

"In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop has been an excellent (average) rule of thumb."

mark3292
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It might be clearer to think of it as price going up when a dividend is expected, since that's money you'll get right back. As the delay before the next dividend payment increases, that becomes less of a factor,

keshlam
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