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 |
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Universiti Utara Malaysia Press
2015
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| Online Access: | https://repo.uum.edu.my/id/eprint/24972/1/IJBS%2011%202014-2015%2031%2053.pdf |
| _version_ | 1825805199710617600 |
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| author | Gunasekarage, Abeyratna Hes, Kurt Power, David |
| author_facet | Gunasekarage, Abeyratna Hes, Kurt Power, David |
| author_sort | Gunasekarage, Abeyratna |
| collection | UUM |
| 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. |
| first_indexed | 2024-07-04T06:28:24Z |
| format | Article |
| id | uum-24972 |
| institution | Universiti Utara Malaysia |
| language | English |
| last_indexed | 2024-07-04T06:28:24Z |
| publishDate | 2015 |
| publisher | Universiti Utara Malaysia Press |
| record_format | eprints |
| spelling | uum-249722018-10-17T03:27:39Z https://repo.uum.edu.my/id/eprint/24972/ Financial Profiles, Dividends and Stock Returns Gunasekarage, Abeyratna Hes, Kurt Power, David HG Finance 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. Universiti Utara Malaysia Press 2015 Article PeerReviewed application/pdf en https://repo.uum.edu.my/id/eprint/24972/1/IJBS%2011%202014-2015%2031%2053.pdf Gunasekarage, Abeyratna and Hes, Kurt and Power, David (2015) Financial Profiles, Dividends and Stock Returns. International Journal of Banking and Finance (IJBF), 11. pp. 31-57. ISSN 1675-7227 http://ijbf.uum.edu.my/index.php/previous-issues/151-volume-11-2014-2015 |
| spellingShingle | HG Finance Gunasekarage, Abeyratna Hes, Kurt Power, David Financial Profiles, Dividends and Stock Returns |
| 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 | HG Finance |
| url | https://repo.uum.edu.my/id/eprint/24972/1/IJBS%2011%202014-2015%2031%2053.pdf |
| work_keys_str_mv | AT gunasekarageabeyratna financialprofilesdividendsandstockreturns AT heskurt financialprofilesdividendsandstockreturns AT powerdavid financialprofilesdividendsandstockreturns |