Abstract
We analyze trading volume around ex-dividend days. We use NYSE audit file data to decompose total trading volume by trader type. These data permit us to directly test detailed hypotheses regarding the identity of traders around the ex-dividend day. We are able to distinguish between dividend-capture trading by taxable corporations and short-term trading by securities dealers. We find evidence of significant abnormal volume by securities dealers that is positively related to dividend yield and negatively related to transaction costs. We also document some abnormal trading volume consistent with corporate dividend-capture trading, but little evidence of tax-clientele trading.
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