An Empirical Analysis of the Volatile Stock Behavior at the event of Dividend Announcement: Evidence from Indian Capital Market (National Stock Exchange of India)
An Empirical Analysis of the Volatile Stock Behavior at the event of Dividend Announcement: Evidence from Indian Capital Market
(National Stock Exchange of India)
ABSTRACT
This paper analyses the impact of dividend announcement on company stock returns for 25 companies listed in five different indices on National Stock Exchange (NSE) i.e. Indian Capital
Market. The study has been conducted with the help of event study methodology for a window of 31 days in total. The study gives a comparative analysis of the stock returns behavior for 15 days before and 15 days after dividend announcement and also of the stock behavior with respect to the Market Index versus the Sector Index for all the companies. The paper has been developed with a view to provide an evidence of stock volatility around the dividend announcement day in the Indian Capital Market i.e. National Stock Exchange of India.
INTRODUCTION
Dividend Checks are appreciated more than capital gains and provide an automatic control device on the spending levels.
Thaler, 1980
The announcement of dividend by a company for its shareholders is an event that creates a lot of volatility in the company s stock returns. Investors can make money from shares and stocks in two ways. First being Capital Appreciation with time and second the dividend paid by the company for holding the stocks.
Dividend is the portion of the company s profits paid to its shareholders.
When a company makes profits after accounting for all the expenses and losses, the company has two options to use those profits. Either they can choose to re-employ the profits in the business or pay it to its shareholders as dividends. The companies have to make a choice between the two and take the decision that benefits the business as well as its shareholders.
Declaration of dividend by companies leads to volatility in the stock prices as dividend attracts the investors to make a return on the money invested in the stock.
(National Stock Exchange of India)
ABSTRACT
This paper analyses the impact of dividend announcement on company stock returns for 25 companies listed in five different indices on National Stock Exchange (NSE) i.e. Indian Capital
Market. The study has been conducted with the help of event study methodology for a window of 31 days in total. The study gives a comparative analysis of the stock returns behavior for 15 days before and 15 days after dividend announcement and also of the stock behavior with respect to the Market Index versus the Sector Index for all the companies. The paper has been developed with a view to provide an evidence of stock volatility around the dividend announcement day in the Indian Capital Market i.e. National Stock Exchange of India.
INTRODUCTION
Dividend Checks are appreciated more than capital gains and provide an automatic control device on the spending levels.
Thaler, 1980
The announcement of dividend by a company for its shareholders is an event that creates a lot of volatility in the company s stock returns. Investors can make money from shares and stocks in two ways. First being Capital Appreciation with time and second the dividend paid by the company for holding the stocks.
Dividend is the portion of the company s profits paid to its shareholders.
When a company makes profits after accounting for all the expenses and losses, the company has two options to use those profits. Either they can choose to re-employ the profits in the business or pay it to its shareholders as dividends. The companies have to make a choice between the two and take the decision that benefits the business as well as its shareholders.
Declaration of dividend by companies leads to volatility in the stock prices as dividend attracts the investors to make a return on the money invested in the stock.
References: August, 2008, Leeds University Business School. Companies in India, APJRBM Volume 1, Issue 3 (December, 2010, pp. 178-189. Methodology, Vilakshan, XIMB Journal of Management; September, 2011 Pp 23-32. Theories and Empirical Evidence, International Bulletin of Business Administration Issue 9 (2010), pp · Franco Azzopardi, Dividend Irrelevance and the Clientele Effect, University Of Leicester, 2004. · Black, Fischer and winter (1976), "The Dividend Puzzle , the Journal of Portfolio Management,