Abstract
WThis paper uses the trading records of institutional equity funds to examine their ex-dividend trading behavior. There are two classes of funds in the study, which differ in their tax-induced preferences for dividends. The funds engage in both short-term and long-term trading about the ex-dividend date. In aggregate, the funds make excess sales cum-dividend and excess purchases ex-dividend. The availability of imputation tax credits, changes in tax incentives and the fund’s tax status all affect ex-dividend day trading as does the level of dividend yield and transaction costs.
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