NBER Publications by Roni Michaely

Previous research showed that the dividend price ratio process changed remarkably during the 1980's and 1990's, but that the total payout ratio (dividends plus repurchases over price) changed very little. We investigate implications of this difference for asset pricing models. In particular, the widely documented decline in the predictive power of dividends for excess stock returns in time series regressions in recent data is vastly overstated. Statistically and economically significant predictability is found at both short and long horizons when total payout yield is used instead of dividend yield. We also provide evidence that total payout yield has information in the cross-section for expected stock returns exceeding that of dividend yield and that the high minus low payout yield portfo...

We survey 384 CFOs and Treasurers, and conduct in-depth interviews with an additional two dozen, to determine the key factors that drive dividend and share repurchase policies. We find that managers are very reluctant to cut dividends, that dividends are smoothed through time, and that dividend increases are tied to long-run sustainable earnings but much less so than in the past. Rather than increasing dividends, many firms now use repurchases as an alternative. Paying out with repurchases is viewed by managers as being more flexible than using dividends, permitting a better opportunity to optimize investment. Managers like to repurchase shares when they feel their stock is undervalued and in an effort to affect EPS. Dividend increases and the level of share repurchases are generally paid ...

We examine the dynamic relation between return and volume of individual stocks. Using a simple model in which investors trade to share risk or speculate on private information, we show that returns generated by risk-sharing trades tend to reverse themselves while returns generated by speculative trades tend to continue themselves. We test this theoretical prediction by analyzing the relation between daily volume and first-order return autocorrelation for individual stocks listed on the NYSE and AMEX. We find that the cross-sectional variation in the relation between volume and return autocorrelation is related to the extent of informed trading in a manner consistent with the theoretical prediction.

Initiations and omissions of dividend payments are important changes in corporate financial policy. This paper investigates the market reaction to such changes in terms of prices, volume, and changes in clientele. Consistent with the prior literature we find that short run price reactions to omissions are greater than for initiations (-7.0% vs. +3.4% three day return). However, we show that, when we control for the change in the magnitude of dividend yield (which is larger for omissions), the asymmetry shrinks or disappears, depending on the specification. In the 12 months after the announcement (excluding the event calendar month), there is a significant positive market-adjusted return for firms initiating dividends of +7.5% and a significant negative market-adjusted return for firms ...