Ex-Dividend Price Behavior in Preferred and Common Stocks: Evidence from Sweden and the U.S.

Abstract

This thesis analyzes price adjustment on and around the ex-dividend date for common and preferred equity in Sweden and the U.S. In a perfect market, theory predicts that stock prices drop by the amount of the dividend on the ex-date. However, due to market frictions, systematic deviations often occur. We examine 834 ex-dividend events from January 2019 through December 2024 using a market model event study. Through this we analyze abnormal and cumulative abnormal returns across a five-day event window. Furthermore we compute Drop Ratios to measure price declines relative to dividend amounts. Cross-sectional OLS regressions which incorporate share type, country dummy variables, standardized turnover, and interaction terms are used to test share type, market, and liquidity in explaining ex-dividend behavior. Results show that most price adjustment occurs on the ex-dividend date, with Swedish stocks exhibiting significantly larger declines than U.S. stocks. The less liquid stocks experience greater under-adjustments, while share type has no consistent effect. These findings highlight how market frictions and institutional factors shape dividend pricing and may inform investors and regulators about cross-market dynamics.