Financial Profiles, Dividends and Stock Returns

Financial Profiles, Dividends and Stock Returns

Blog Article

The aims of this paper are (a) to examine whether changes B12 Vitamins / Methylcobalamine 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 Barstool 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.