Ex-dividend returns: The Mexican puzzle |
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Authors: | Palani-Rajan Kadapakkam Valeria Martinez |
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Affiliation: | 1. Department of Finance, University of Texas at San Antonio, San Antonio, TX 78249, USA;2. Department of Finance, Fairfield University, Fairfield, CT 06824, USA |
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Abstract: | We study ex-dividend returns in Mexico, where an imputation system entitles individual investors to a net dividend tax credit. Based on taxation, we expect ex-day abnormal returns to be negative or at most zero in Mexico. However, they are significantly positive. Because ex-day returns are positive even for stocks restricted to Mexican nationals, they are not attributable to foreign stockholders’ tax considerations. None of the market microstructure-based hypothesis in the literature can explain these positive ex-day returns. Ex-day returns in Mexico are a puzzle. |
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Keywords: | G14 G35 |
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