Question

is investors do not like dividebds becasue of the additional taxes that they have to pay,...

is investors do not like dividebds becasue of the additional taxes that they have to pay, how would yoh, expect stock proces to behave on the ex-devidend date?

fall exactly by the amount of the dividend

fall by less than the amount of the dividend

fall by more than the amount of the dividend

the result cannot be predicted

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Answer #1

The answer is “fall exactly by the amount of the dividend”.

Explanation: On the ex-dividend date the stock starts trading without the value of its next dividend payment. The price of the stock will be marked down by the amount of the dividend on the ex-dividend date.

[Note that if taxes are considered and if taxes exist then the answer will be "fall by less than the amount of the dividend". This is because in such a case the fall will be = dividend amount * (1-tax rate)]

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