Ex-dividend day price and volume: the case of 2003 dividend tax cut.

Post-Act 1 0.719 *** 0.049 2 0.760 *** 0.026 (c) 3 0.958 0.031 (b) 4 1.100 ** 0.049 Notes: We separate the sample into groups based on annualized dividend yields. Data are winsorized at [2.5%,97.5%]. The mean PDR is adjusted for heteroskedasticity. Pre-Act period is from February 1, 2001 to December 31, 2002; Post-Act period is from January 1, 2004 to December 31, 2005. Statistical significance for testing mean or median PDR different from one is indicated in the table. We also test for the difference between the PDR of the dividend yield group and the next higher dividend yield group (e.g., group 1 to group 2). **, and *** indicate statistical significance at the 10%, 5%, and 1 % levels, respectively. (a), (b), and (c) indicates statistically significant (10%, 5%, and 1 % levels) difference from the next dividend yield group. TABLE 6 EXCESS RETURN GROUPED BY DIVIDEND YIELD

Pre-Act

Dividend Group Yield (y) N ER (%) SE (%) 1 y<=2% 4,094 0.142 *** 0.030 (c) 2 2%6% 212 0.130 0.122

Post-Act Group N ER (%) SE (%) 1 4,749 0.094 *** 0.019 (b) 2 3,839 0.163 *** 0.020 (c) 3 721 0.027 0.036 (b) 4 140 -0.137 0.111 Notes: We separate the sample into groups based on annualized dividend yields. The mean excess return is adjusted for heteroskedasticity. Pre-Act period is from February 1, 2001 to December 31, 2002; Post-Act period is from January 1, 2004 to December 31, 2005. Standard errors for the mean excess return are reported. Statistical significance for testing mean excess return different from zero is indicated in the table. We also test for the difference in the excess return between the dividend yield group and the next higher dividend yield group (e.g., group 1 to group 2). *, **, and *** indicate statistical significance at the 10%, 5%, and 1% levels, respectively. (a), (b), and (c), indicates statistically significant (10%, 5%, and 1% levels) difference from the next dividend yield group. TABLE 7 THE AV FOR THE TEN DAYS SURROUNDING THE EX-DIVIDEND DAY

Panel A: Full Sample

Pre-Act Post-Act Day AV (%) t-stat AV (%) t-stat -5 2.83 *** 2.42 7.75 *** 5.55 -4 4.96 *** 3.10 6.81 *** 5.00 -3 2.31 1.75 5.51 *** 3.75 -2 0.78 *** 0.56 4.91 *** 3.43 -1 12.48 *** 6.98 11.90 *** 6.01 0 18.44 *** 7.08 7.72 *** 7.32 1 6.05 *** 2.53 2.60 ** 2.07 2 13.07 *** 2.53 3.40 *** 2.84 3 0.16 0.12 3.08 *** 2.80 4 -0.42 -0.20 1.30 1.18 5 0.11 0.07 2.44 *** 2.28

Panel B: High Dividend Yield

Pre-Act Post-Act Day AV (%) t-stat AV (%) t-stat -5 2.10 0.89 3.44 1.81 -4 3.12 1.30 0.48 0.25 -3 -0.09 -0.04 4.24 * 2.10 -2 0.60 0.25 9.90 *** 4.76 -1 35.86 *** 9.79 18.02 *** 8.25 0 28.62 *** 8.43 19.83 *** 8.36 1 3.38 1.38 0.95 0.49 2 2.82 1.05 -0.64 -0.32 3 -1.95 -0.84 2.72 1.38 4 11.19 -1.75 -0.63 -0.34 5 -1.53 -0.66 -2.64 -1.13 Notes: AV is defined as the difference between a stock's actual to average turnover, relative to the average turnover. Daily turnover is defined as the ratio of daily shares traded to shares outstanding. We compute the average turnover by using the estimation period [115, -01 and [6, 45]. Data are winsorized at [2-5%, 97.5%]. T-statistics for testing whether AV is equal to zero are computed using the cross-sectional estimates of the variance of AV. Pre-Act period is from February 1, 2001 to December 31, 2002; Post-Act period is from January 1, 2004 to December 31, 2005. The high dividend yield sample is those stocks with an annualized dividend yield greater than 4%. The CAV in Figures 4 and 5 is the sum of the AV up to and including that day. **, and *** indicate statistical significance at the 10%, 5%, and 1%, levels, respectively. TABLE 8 CUMULATIVE ABNORMAL VOLUME

Pre-Act Post-Act Post-Pre

N CAV (%) N CAV (%) CAV (%) Full sample 9,031 27.29 *** 9,449 31.53 *** 4.24

(4.99) (7.28) (0.61) Low-yield 4,094 3.22 4,749 16.44 *** 13.22 group (0.44) (2.78) (1.41) Medium-yield 3,673 0.49 3,839 34.58 *** 34.09 *** group (0.06) (4.90) (3.03) High-yield 1,264 183.14 *** 861 101.12 *** -82.03 *** group (10.48) (7.22) (-3.66) Notes: The CAV is the sum of the AV during the 11-day event window encompassing the ex-dividend day. Data are winsorized at [2.5%, 97.5%]. Low dividend yield group has an annualized dividend yield less than or equal to 2%. High dividend yield group has an annualized dividend yield greater than 4%. The remainder of the sample is the medium-yield group. Pre-Act period is from February 1, 2001 to December 31, 2002; Post-Act period is from January 1, 2004 to December 31, 2005. *, and *** indicate statistical significance at the 10%, 5%, and 1% levels, respectively. TABLE 9 TESTS OF THE CHANGE IN THE CAV

High- Medium- Low-

Full Yield Yield Yield

Sample Group Group Group Intercept -3.165 *** -3.652 *** -2.848 *** -1.758 ***

(-15.14) (-5.73) (-6.69) (-5.15) PostDum 0.176 ** -0.820 *** 0.334 *** -0.295

(2.34) (-3.21) (2.74) (2.92) Yield 28.419 *** 28.021 *** -1.609 0.092

(13.18) (5.41) (-0.16) (0.01) Risk -0.018 ** -0.091 ** 0.011 -0.032 ***

(-2.49) (-3.15) (0.91) (3.44) Beta -0.421 *** -0.890 *** -0.417 *** -0.316 ***

(-6.03) (-3.37) (-3.37) (-3.38) Market cap 0.213 *** 0.338 *** 0.228 *** 0.139 ***

(15.69) (7.54) (10.58) (6.95) Sample size 18,480 2,125 7,512 8,843 [R.sub.2] 0.0226 0.061 0.0165 0.0092 Notes: We test the structural changes in CAV ten days surrounding the ex-dividend day. The dependent variable of the Ordinary Least Squares model is the CAV Data are winsorized at [25%, 97.5%]. Pre-Act period is from February 1, 2001 to December 31, 2002; Post-Act period is from January 1, 2004 to December 31, 2005. PostDum = 0 for Pre-Act period and 1 otherwise. Low-yield group has an annualized dividend yield less than or equal to 2%. High-yield group has an annualized dividend yield greater than 4%. The remainder of the sample is the medium-yield group. Dividend yield is calculated by dividing the dividend amount by the cum-dividend day closing price. Risk is measured by the variance of a security's return scaled by the variance of the market return during the estimation period [-25, -0] and [6, 25]. Beta is obtained from the OLS market model. Market cap is the natural logarithm of the market capitalization on the cum-dividend day (i.e., cum-dividend day price multiplied by the outstanding shares). T-statistics for testing the difference from zero are in parentheses. **, and *** indicate statistical significance at the 10%, 5%, and 1% levels, respectively.