The impact of cash dividends on stock prices in the U.S.

Abstract

The objective of this study is to research the impact of cash dividend announcement on the stock price of the U.S. To achieve this goal, we collect the daily prices of 31 randomly chosen stocks in the U.S., and employ the Market Model to test whether the null hypotheses, AAR=0 and ACAR=0, hold. The results suggest that the average abnormal return and the average cumulative abnormal return, which are surrounding the event date, are not significantly equal to zero. This means that we cannot reject the possibility that one can gain abnormal return from the cash dividend announcement. This implies that the market is likely to be not efficient with the semi-strong from.