Ex-effects: An empirical reassessment of the clientele effect using UK data

This paper deals with two empirical aspects of the Elton and Gruber tax-induced clientele hypothesis. The first is the extent to which estimates of the central location of the ‘ex-dividend’ statistic, or marginal capitalisation of the dividend due, is influenced by different methods of estimation. The second is the degree to which the widely reported ‘dividend yield’ effect is a robust feature of the data, or whether its origins lie in aggregation effects or thin trading. The results suggest that the yield effect is much weaker than is generally claimed, bringing into question the simple tax-induced clientele hypothesis as the main explanation of cum-div to ex-div market value transitions.