Dividend Price Pressure on Oslo Stock Exchange: Assessing the effect of dividend reinvestments on daily market returns
Abstract
This thesis assesses the existence of dividend price pressure on Oslo Stock Exchange by
measuring daily market returns against aggregate dividend payment yields. The thesis studies
the period from January 2005 to November 2020.
We find evidence that predictable cash inflows from dividend reinvestments lead to abnormal
daily market returns when controlling for oil price and global market variation. The base
regression shows that a 0.1% increase in the aggregate daily dividend yield predicts increased
daily value weighted market returns of 2.5 basis points. We also find that days in the top 5 of
the recent rolling year’s largest aggregate dividend payment yields exhibit significantly higher
returns with control variables. However, alternative measurements place doubt on these
results. Also, we test but cannot conclude whether the substantial state ownership on Oslo
Stock Exchange affects obtained results. When excluding control variables, we find no
evidence that predictable price pressure exists.
Considering that we find no evidence without control variables, and somewhat unsteady
evidence with, it comes as no surprise that the economic significance of the studied effects is
highly limited. The magnitudes of the results are miniscule and, for an investor on the Oslo
Stock Exchange, next to completely irrelevant.