FNCE10002 Lecture Notes - Lecture 10: Dividend Payout Ratio, Australian Taxation Office, Capital Gains Tax
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If the capm is valid, returns in the test period should be explained by the betas from the estimation period. If a (cid:272)o(cid:373)pa(cid:374)(cid:455) does(cid:374)"t pa(cid:455) di(cid:448)ide(cid:374)ds, (cid:455)ou (cid:272)a(cid:374) (cid:373)ake o(cid:374)e (cid:455)ou(cid:396)self: (cid:862)ho(cid:373)e-(cid:373)ade di(cid:448)ide(cid:374)ds(cid:863: suppose you own 100 shares, each with a market price of . If you wanted to, you could sell 5 shares (for : then you would have shares worth and in cash, this looks identical to case 1, explanation: a dividend is a partial liquidation of a company. To a first approximation, it does(cid:374)"t (cid:373)atte(cid:396) (cid:449)hethe(cid:396) pa(cid:396)tial li(cid:395)uidatio(cid:374) is u(cid:374)de(cid:396)take(cid:374) (cid:271)(cid:455): the company (paying a dividend), or, a shareholder (selling some shares) In practice, there are three differences between cases 1 and 2. These are: transaction costs, voting rights, taxes, transaction costs. In case 1 there are transaction costs in paying a dividend (e. g. postage, bank fees) In case 2 there are transaction costs like brokerage. But this difference is usually very small: voting rights.
