Do Dividend Clienteles Exist? Evidence on Dividend Preferences of Retail Investors
37 Pages Posted: 2 Jan 2004
Date Written: April 28, 2005
We study stock holdings and trading behavior of more than 60,000 households and find evidence consistent with dividend clienteles. Retail investor stock holdings indicate a preference for dividend yield that increases with age and decreases with income, consistent with age and tax clienteles, respectively. Trading patterns reinforce this evidence: Older, low-income investors disproportionally purchase stocks before the ex-dividend day. Furthermore, among small stocks, the ex-day price drop decreases with age and increases with income, consistent with clientele effects. Finally, consistent with the behavioral attention hypothesis, we document that older and low-income investors purchase stocks following dividend announcements.
Keywords: Retail investors, Dividend clienteles, Dividend events, Dividend taxation, Attention hypothesis
JEL Classification: G11, G14, G35, H24
Suggested Citation: Suggested Citation