Seasonality in ex dividend day returns

Abstract

It is documented that for both high- and low-yield stocks, ex day raw returns are systematically higher in January than for the other months of the year. Although such patterns are not predicted by any known tax-clienteles model, they are consistent with the price discreteness and spread models in the spirit of Bali and Hite (Journal of Financial Economics, 47, 127–59, 1998) and Bali (Journal of Economics and Finance, 27, 190–210, 2003). For high-yield stocks in January, the returns are about one-fourth those for low-yield stocks, and for the remaining months they are significantly negative. The rents that arbitrageurs earn for supplying liquidity are higher for low-yield stocks and are significantly higher in January.