1. What are the contributions in "Nber working paper series a catering theory of dividends" ?
The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.
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2. What are the future works in "Nber working paper series a catering theory of dividends" ?
After reviewing other possibilities, the authors conclude that catering is the most natural explanation.. This is suggested in the connection between the closed-end fund discount and the dividend premium, and in instrumental variables estimates of the effect of the dividend premium on dividend payment.. To address the potential for bias and conduct inference, the authors use a bootstrap estimation technique.. With these in hand, the authors can determine the probability of observing an estimate as large as the OLS b by chance, given the true b = 0.
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3. What is the main reason why investors fall prey to this argument?
Naïve investors, such as retirees and those who hold dividend-paying stocks for “income” despite the tax penalty, would seem especially likely to fall prey to this bird-in-thehand argument.
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4. How much of the change in the amount of dividends paid by payers is positive?
In the average year in oursample, newly-initiated dividends amount to 0.5% of dividends already paid by payers, and 29% of the change in the amount that is paid by payers (in years when this change is positive).
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![Table 3. The Citizens Utilities dividend premium and market reactions to dividend initiations, 1962-2000. The Citizens Utilities (CU) price ratio is the log of the ratio of the annual average cash dividend class share price to the annual average stock dividend class share price. The 1962 through 1972 data are from Long (1978) and the 1973 through 1989 data are from CRSP. A firm is defined as a new dividend payer at time t if it has positive dividends per share by the ex date (Item 26) at time t and zero dividends per share by the ex date at time t -1. We take the first dividend declaration date (DCLRDT) from CRSP in the twelve month period prior to the fiscal year ending in t. We calculate the sum of the differences between the firm return (RET) and the CRSP value-weighted market return (VWRETD) for a three-day window [-1, +1] around the declaration date. The announcement effect A scales this return by the standard deviation of the excess returns between 120 calendar days and five trading days before the declaration date. The test statistic from Campbell, Lo, and Mackinlay (1997, equation 4.4.24) is shown in braces and tests the null hypothesis of zero average price reaction in year t.](/figures/table-3-the-citizens-utilities-dividend-premium-and-market-1tl9h9cs.webp)
![Table 4. Statistics for demand for dividend measures, 1962-2000. The first column shows the autocorrelation coefficient, the second column shows a Dickey-Fuller test, and the remaining columns show the correlations among the variables. The dividend premium PD-ND is the difference between the logs of the EW and VW market-to-book ratios for dividend payers and nonpayers. The Citizens Utilities dividend premium PCU is the log of the ratio of the annual average cash dividend class share price to the annual average stock dividend class share price. The initiation announcement effect A is the average standardized excess return in a three-day window [-1, +1] around the first declaration dates by new dividend payers. Future relative returns rDt+1 – rNDt+1 is the difference in real returns for value-weighted indexes of dividend payers and nonpayers in year t+1. Future relative returns RDt+3 – RNDt+3 is the cumulative difference in future returns from year t+1 through t+3. P-values are in brackets.](/figures/table-4-statistics-for-demand-for-dividend-measures-1962-249nfg0n.webp)
