The Empirical Observation That Stock Prices Fall on Ex-Dividend Days

question 42

Multiple Choice

The empirical observation that stock prices fall on ex-dividend days by significantly less than the amount of the dividend has been often interpreted

• A) as completely unexplainable by researchers.
• B) as evidence that dividends are more highly valued than capital gains.
• C) as evidence of a tax effect in dividend valuation.
• D) none of the above.

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Definitions:

Interaction Effect

Occurs when the effect of one independent variable on the dependent variable differs depending on the levels or values of another independent variable.

F-Ratio

The ratio used in analysis of variance (ANOVA) to compare the variance between groups to the variance within groups.

Main Effect

The main effect is the impact of an independent variable on a dependent variable in a statistical model, ignoring other variables' influences.

Factor A

Factor A is often used in experimental design to represent one of the independent variables being tested for its effect on a dependent variable.