Forum Archive Index - June 2000

["Oliver Shapleski" <oliver.shapleski@vuw.ac.nz>]

Jeremy, two words.  Fuzzy logic.  Unfortunately your worked example
completely misses the totally obvious.

A payment of a dividend AUTOMATICALLY and ALWAYS drops the share price.
Watch Telecom go ex-dividend on Tuesday and observe the share price.  All
other things being equal the price of the share will drop by the amount of
the dividend less tax.  Historically shares go ex-dividend at a price down
75% of the amount of the dividend.  Thus all things being equal when Telecom
goes ex-div the price of the share will fall by .75 x 11.5 cents.  The 75%
amount will vary depending on the tax structures of the country concerned
and the proportion of institutional investors vs small investors.

If you'd like to rework your example I'd be happy to comment on it then.

Oliver


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