Consuming Dividends

Dividends with Demand Response

Risk, Return and Dividends∗

We characterize the joint dynamics of expected returns, stochastic volatility, and prices. In particular, with a given dividend process, one of the processes of the expected return, the stock volatility, or the price-dividend ratio fully determines the other two. For example, the stock volatility determines the expected return and the price-dividend ratio. By parameterizing one, or more, of exp...

The Distribution of Corporate Dividends

Of primary importance to the investor in corporate shares is the dividend return. But many a purchaser of shares has other dominant interests. He may desire merely to qualify to be a director. He may be a "pirate" and contenplate a particular suit which he can institute only as a shareholder. He may hope to acquire the right of a shareholder to examine the stock ledger or other books or records...

Dividends and Taxes

How do dividend taxes affect firm behavior and what are their distributional and efficiency effects? To answer these questions, the first problem is coming up with an explanation for why firms pay dividends, in spite of their tax penalty. This paper surveys three different models for why firms pay dividends, and then uses each model to examine the behavioral and efficiency effects of dividend t...

Equity with Markov-modulated dividends

We introduce a simple model for the pricing of European style options when the underlying dividend process is given by a geometric Brownian motion with Markov-modulated coefficients. It turns out that the corresponding stock process is characterized by both stochastic coefficients and jumps. Transform methods are used to recover option prices. The model is calibrated to market data and the resu...