Working Paper Alfred P. Sloan School of Management Trading Volume with Private Valuations: Theory and Evidence from the Ex-dividend Day Theory and Evidence from the Ex-dividend Day

Abstract

We develop and test a theory of the interaction between investors' heterogeneity, risk, transactions costs and trading volume. To test our model we take advantage of the specific nature of trading motives around the distribution of cash dividends namely the costly trading of tax shields. Consistent with the theory, we show that when trades occur because of… (More)

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