Working Paper: NBER ID: w30688
Authors: Samuel M. Hartzmark; David H. Solomon
Abstract: We demonstrate that predictable uninformed cash flows forecast market and individual stock returns. Buying pressure from dividend payments (announced weeks prior) predicts higher value-weighted market returns, with returns for the top quintile of payment days four times higher than the lowest. This holds internationally, and increases when reinvestment is high and market liquidity is low. High stock expense firms have lower returns from selling pressure after blackout periods, by 117 b.p. in four days. We estimate market-level price multipliers of 1.5 to 2.3. These results suggest price pressure is a widespread result of flows, not an anomaly.
Keywords: No keywords provided
JEL Codes: G12; G14; G4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Buying pressure from dividend payments (G35) | Higher market returns (G19) |
| Dividend payments (G35) | Price pressure (D41) |
| Predictable flows from dividend reinvestment (G35) | Price pressure (D41) |
| High stock expense firms (G32) | Lower returns from selling pressure after blackout periods (G14) |
| Dividend payments (G35) | Higher market returns (on highest quintile days) (G14) |
| Dividend payments (G35) | Consistent effects on market returns across international markets (G15) |