The Ex-Dividend Day Stock Price Anomaly : Evidence from Denmark

We examine ex-dividend day behavior on the Copenhagen Stock Exchange. We report price drop ratios of 25%, well below the 70-80% from U.S. data. The tax clientele hypothesis predicts ratios between 57% and 126% based on the Danish tax structure. Our results conflict with tax and tick size models, but they are consistent with limit order adjustment explanations from Dubofsky (1992) and Jakob and Ma (2004, 2005). An unusual average price trading opportunity also facilitates the low ratios. Average price trades have no direct supply or demand impact in the market, and therefore do not drive the ratios toward one