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Title: An empirical analysis of the relationship between dividend yields and returns in the UK equity market
Author: Morgan, G.
Awarding Body: University College of Swansea
Current Institution: Swansea University
Date of Award: 1995
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This thesis investigates a variety of aspects of the relationship between dividend yields and returns on the London Stock Exchange. Following recent attention in the financial press, the use of dividend yields as a means of identifying undervalued stocks is investigated, and a variety of dividend yield-based investment strategies are analysed. Small portfolios of high-yielding large stocks are found to generate substantial outperformance relative to a market index. When returns are calculated on a risk-adjusted basis, the positive relation between dividend yields and returns continues, although zero dividend stocks exhibit unique characteristics which are consistent with prior US research. The positive yield-return relation is robust to controls for size and absolute share price effects, and several significant seasonal effects are detected. The results are interpreted as being inconsistent with tax-driven models of the relation between dividend yields and pre-tax returns. The stability of a stock's dividend policy is shown to have a role to play in explaining the risk characteristics of UK stocks, with a significant inverse relation being found between dividend stability and systematic risk.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available