Financial Profiles, Dividends and Stock Returns
The aims of this paper are (a) to examine whether changes in dividend can be forecasted from past financial statement information and (b) to investigate whether such forecasts can be exploited to yield abnormal returns. A two-step approach is adopted. First, a logit model is developed to predict one...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Universiti Utara Malaysia
2015-12-01
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| Series: | The International Journal of Banking and Finance |
| Subjects: | |
| Online Access: | https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8482 |
| _version_ | 1797958159591014400 |
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| author | Abeyratna Gunasekarage Kurt Hess David Power |
| author_facet | Abeyratna Gunasekarage Kurt Hess David Power |
| author_sort | Abeyratna Gunasekarage |
| collection | DOAJ |
| description | The aims of this paper are (a) to examine whether changes in dividend can be forecasted from past financial statement information and (b) to investigate whether such forecasts can be exploited to yield abnormal returns. A two-step approach is adopted. First, a logit model is developed to predict one year-ahead changes in dividends. Second, the buy-and-hold returns for a trading strategy based on the dividend forecasts are calculated. The logit model developed has some success in predicting future dividend changes. However, attempts to exploit these predictions proved unsuccessful; a strategy of buying (selling) shares where dividends were predicted to increase (decrease) would earn a negative abnormal return of -2.34% over 24 months. This is one of the first studies to forecast dividend changes for a sample of New Zealand companies using past financial statement data and to test if the market is semi-strong-form efficient with respect to these dividend predictions.
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| first_indexed | 2024-04-11T00:14:57Z |
| format | Article |
| id | doaj.art-097048eff98b47eda09f8311eb617990 |
| institution | Directory Open Access Journal |
| issn | 2811-3799 2590-423X |
| language | English |
| last_indexed | 2024-04-11T00:14:57Z |
| publishDate | 2015-12-01 |
| publisher | Universiti Utara Malaysia |
| record_format | Article |
| series | The International Journal of Banking and Finance |
| spelling | doaj.art-097048eff98b47eda09f8311eb6179902023-01-09T03:08:09ZengUniversiti Utara MalaysiaThe International Journal of Banking and Finance2811-37992590-423X2015-12-0111Financial Profiles, Dividends and Stock ReturnsAbeyratna Gunasekarage0Kurt Hess1David Power2Monash University, Melbourne, AustraliaIndependent Credit View AG, Zürich, SwitzerlandUniversity of Dundee, United KingdomThe aims of this paper are (a) to examine whether changes in dividend can be forecasted from past financial statement information and (b) to investigate whether such forecasts can be exploited to yield abnormal returns. A two-step approach is adopted. First, a logit model is developed to predict one year-ahead changes in dividends. Second, the buy-and-hold returns for a trading strategy based on the dividend forecasts are calculated. The logit model developed has some success in predicting future dividend changes. However, attempts to exploit these predictions proved unsuccessful; a strategy of buying (selling) shares where dividends were predicted to increase (decrease) would earn a negative abnormal return of -2.34% over 24 months. This is one of the first studies to forecast dividend changes for a sample of New Zealand companies using past financial statement data and to test if the market is semi-strong-form efficient with respect to these dividend predictions. https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8482DividendFinancial ProfilesLogit ModelStock ReturnNew Zealand |
| spellingShingle | Abeyratna Gunasekarage Kurt Hess David Power Financial Profiles, Dividends and Stock Returns The International Journal of Banking and Finance Dividend Financial Profiles Logit Model Stock Return New Zealand |
| title | Financial Profiles, Dividends and Stock Returns |
| title_full | Financial Profiles, Dividends and Stock Returns |
| title_fullStr | Financial Profiles, Dividends and Stock Returns |
| title_full_unstemmed | Financial Profiles, Dividends and Stock Returns |
| title_short | Financial Profiles, Dividends and Stock Returns |
| title_sort | financial profiles dividends and stock returns |
| topic | Dividend Financial Profiles Logit Model Stock Return New Zealand |
| url | https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8482 |
| work_keys_str_mv | AT abeyratnagunasekarage financialprofilesdividendsandstockreturns AT kurthess financialprofilesdividendsandstockreturns AT davidpower financialprofilesdividendsandstockreturns |