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REITs, Decimalization, and Ex-dividend Stock Prices

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Abstract

The ex-dividend pricing of real estate investment trust (REIT) stocks under fractional and decimal pricing regimes is investigated. For REITs, with the move from discrete to decimal pricing, the price drop on the ex-dividend day approaches the dividend amount, the ex-date abnormal return decreases, the spread-to-dividend ratio declines, abnormal trading volume increases, and the potential erroneous appearance of a tax-clientele effect is diminished. Discreteness and other transaction costs are reduced with decimalization implying that part of the persistence in the appearance of the tax-clientele effect when modeling ex-dividend stock pricing might be generated by the interaction between transaction costs, dividend amount, and yield.

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Authors and Affiliations

  1. Department of Finance and Real Estate, Florida International University, 11200, SW 8th Street, Miami, FL, 33199, USA

    William G. Hardin III

  2. Department of Finance and Economics, Mississippi State University, Box 9580, Mississippi State, MS, 39762-9580, USA

    Kartono Liano & Gregory L. Nagel

  3. Department of Accounting and Finance, Alabama State University, Box 271, Montgomery, AL, 36104, USA

    Gow-Cheng Huang

Authors
  1. William G. Hardin III
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  2. Kartono Liano
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  3. Gow-Cheng Huang
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  4. Gregory L. Nagel
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Correspondence to William G. Hardin III.

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Hardin, W.G., Liano, K., Huang, GC. et al. REITs, Decimalization, and Ex-dividend Stock Prices. J Real Estate Finan Econ 34, 499–511 (2007). https://doi.org/10.1007/s11146-007-9024-z

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  • DOI: https://doi.org/10.1007/s11146-007-9024-z

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