This paper analyzes the theoretical problem of the real option with barrier. It models an investment decision with a double irreversibility concern: investing is irreversible, but waiting runs the risk of loosing the opportunity to invest. The optimal strategy leads to earlier investment when the barrier increases, or when uncertainty decreases. Uncertainty has ambiguous effects on the expected...

In this study, we examine the impact of dividend and capital gains taxes on dividendincrease announcement returns. Consistent with Bernheim and Wantz (1995), we find dividend announcement returns increase in the dividend tax rate. In contrast to existing signaling models, however, we also find robust evidence that dividend announcement returns increase in the capital gains tax rate. This anomal...

We model consumption and dividend growth as different processes across two latent regimes. We estimate the equilibrium model over 1930-2009 and show that the second regime is associated with recessions, market downturns, higher risk premia, lower consumption and dividend growth, higher volatility of returns and growth rates, and lower market-wide price-dividend ratio. The model performs better ...

We compare the dividend policies of privatelyand publicly-held firms in order to examine Lintner’s (1956) model of dividends, as wells as more recent agency-based and informationbased explanations of observed dividend behavior. Our findings suggest that both public and private firms exhibit a strong aversion to dividend cuts and omissions; however, public firms adhere to a consistent policy of ...

in traditional portfolio selection model coefficients often are certain and deterministic, but in real world these coefficients are probabilistic. so decision maker cannot estimate them exactly. financial optimization is one of the most attractive areas in decision under uncertainty. in the portfolio selection problem the decision maker considers simultaneously conflicting objectives such as ra...

Based on the fundamental equations of equity valuation, we derive here the relationship between the equity risk premium, duration and dividend yield. Aside from providing a logical foundation for the difference between the ex-ante and ex-post measures of the risk premium, the work leads to other outcomes, namely, but not specifically, (1) that the current, effective dividend policy is a signall...

Due to the overwhelming international evidence that stock prices drop by less than the dividend paid on ex-dividend days, the ex-dividend day anomaly is considered a stylized fact. Two main approaches have emerged to explain this empirical regularity: the tax-clientele hypothesis and the microstructure of financial markets. Although the most widely accepted explanation for this fact relies on t...

We analyze the regularity of the optimal exercise boundary for the American Put option when the underlying asset pays a discrete dividend at a known time td during the lifetime of the option. The ex-dividend asset price process is assumed to follow Black-Scholes dynamics and the dividend amount is a deterministic function of the ex-dividend asset price just before the dividend date. The solutio...

We consider the finite time horizon dividend-ruin model where the firm pays out dividends to its shareholders according to a dividend-barrier strategy and becomes ruined when the firm asset value falls below the default threshold. The asset value process is modeled as a restricted Geometric Brownian process with an upper reflecting (dividend) barrier and a lower absorbing (ruin) barrier. Analyt...

Executive Summary. Both dividend yields and past returns have predictive power for P/E ratios; hence they can be used as tools in forming a market timing and asset allocation strategy in stock markets. This study examines the extent to which changes in real estate returns, reflected in changes of property value and dividend yields, can have great effects on P/E ratios. The study is confined to ...