Implications of dividend announcements for stock prices and trading volume of DAX companies

This paper deals with market reactions to dividend announcements on the German stock market. The authors' study is based on a model of expected dividends with regard to the reluctance-to-change-dividends hypothesis. State-of-the-art models are used to detect price and volume reactions to dividend news. Empirical results provide evidence that announced dividend changes convey new information to the market. On average, stock prices move in the same direction as dividends. One can observe an increase in stock-return volatility in anticipation of expected news. For the entire sample, the authors find that trading volumes exhibit significant increases around dividend announcement dates. This supports the hypothesis that dividend change in either direction causes an increase in investors' propensity to revise their portfolios.