large stable dividend stocks vs diversified funds

[Zathras]

Well, looks like I will eat my words

While the opening price is shown as $64.73 (which would only be 27 cents) the price is showing $64.74 UP 12 cents. That would be up 12 cents from $64.62 which is yesterdays close - the dividend amount(37.5 cents).

While this possibly could be market movement, it is awefully exact. In either event though, the correction is there, although it quickly gets 'absorbed'.

Thanks for teaching me something new Math

 

[Nords]

While we've all noted some very interesting market behavior, there's nothing to document whether it's caused by investor psychology & market arbitrage or by exchange rules.

Until we can find the exchange rule that sets those prices, I'm not convinced that prices are required to be adjusted for dividends.

Everything that we've observed can be explained by market makers adjusting their prices to match the dividends, but that doesn't tell us whether they do so because of an exchange rule or if they do it just because that's the way they've learned works best.

Let me reiterate, Mathjak, that you still haven't backed up your claims with a rulebook or any other reference. The quoted study is just another research attempt to decide if stock prices are affected by dividends, and those guys didn't quote a rule on the prices-- only on the stop loss orders.

I haven't found anything to support your claims either, but I'm not the guy that made those claims as if they were a stone-cold fact.

 

[wabmester]

I haven't really been following this thread, but here's a paper that talks about stock prices on ex-dividend day:

Buying the Dividend

The behavior of share prices around ex-dividend days has been the subject of extensive theoretical and empirical research for nearly 50 years. Prior empirical studies consistently document that, on average, share prices decline on the ex-dividend day by less than the dividend amount.

Regarding exchange rules:

... finds that abnormal ex-day returns are induced by NYSE Rule 118 and AMEX Rule 132, which dictate that specialists must adjust all open limit buy orders by the amount of the dividend and round down to the next tick if necessary.

 

[mathjak107]

im tired of beating this dead horse...last posting im doing on this topic so heres some more documentation

"

(NYSE) Rule 118 and American Stock Exchange (AMEX) Rule 132, which dictate how open ("good-till-canceled") limit orders to buy and sell stock are handled on ex-days. On both exchanges, open limit orders to buy stock must be reduced by the cash dividend amount on ex-cash dividend days. If the resulting price is not a multiple of an eighth of a dollar, then an ex-cash dividend limit buy order price is reduced to the next lower eighth. Limit orders to sell are not changed by the ex-cash dividend event.(5) In addition, patterns in ex-day abnormal returns are shown to arise because trading is done at discrete price intervals (normally $1/8 for stocks selling above one dollar per share), while cash and stock dividends paid per share are usually not multiples of eighths.

On ex-stock distribution days, NYSE Rule 118 and AMEX Rule 132 require a specialist to reduce all outstanding limit buy orders. The new limit order price equals the original limit order price divided by 100% plus the percentage value of the stock distribution. For example, a limit order price will be divided by 101% when there is a one percent stock dividend. If the resulting price is not a multiple of an eighth of a dollar, then the limit buy price is reduced to the next lower eighth. Outstanding limit sell orders for NYSE stocks are not reduced; however, AMEX limit sell order prices are reduced by 100% plus the percentage value of the stock distribution, and rounded down if necessary, when a stock trades ex-distribution

case closed..if you think your getting something extra when you get a dividend that you didnt have before the dividend then keep believing it . 
if you believe the dividend is just a wash ,nothing gained or lost from the dividend payment its self then you are correct....there may be associated action in the market related to the dividend payment moving the stock up or down but thats not what we are refering to in this discussion..

its the dropping of all the offers by the dividend amount that translates into the stock price dropping by the dividend amount......

 

[mathjak107]

only thing i didnt know is on the nyse limit orders to sell arent reduced but on the amex they are......buy orders are reduced on both....