Abstract The relationship between dividend buying and stock volatility is the subject of our research. It focuses on all the listed companies on the Swedish stock market, with a particular emphasis on dividend buying and the impact of stock volatility on the underlying stocks of the indices in our sample. As a result of the problem being discussed, the following research question was posed: What is the relationship between dividend buying and stock volatility? From this question, we investigate the impact of dividend buying on the 'dividend – stock volatility' and contribute to this body of knowledge. We want to see if the average stock volatility between the announcement day and the record date indicates dividend buying compared to the average monthly/weekly volatility during the fiscal year. We applied a theoretical framework that is based mostly on financial and behavioral theories in addressing dividends, stock returns, stock volatility, dividend buying, and the relationship between them. Based on the theories we built up two hypotheses and followed deduction approach and quantitative research strategy for our research paper. The data source for this research study is the Thompson Reuters Eikon Database. Applying the screener function, we obtained all the dividend paying Swedish Public Companies for 5 years. In total they were 226. We carried out a multivariate multiple regression using 5-year historical securities price data from the Swedish stock market. Our variables were Beta and Standard Deviation of prices as dependent variables and dividend yields as the independent variable. We also checked the respective companies' debt-equity ratio and market caps. After controlling the variables market cap and debt-equity ratio, the results were significant for 2013, 2015, 2016, and 2017 but insignificant for 2014. However, there was a significant negative correlation between dividend yield and beta in all years. This yields an inconclusive result that necessitates further research. As a result, we conclude that dividend buying (dividend yield), and stock volatility have a negative relationship when considering both standard deviation and beta as indicators of volatility. This study's findings partially support evidence from Baskin's (1989) research study, which found a significant positive relationship between stock price volatility and dividend yield. Furthermore, the findings of the study back up Allen and Rachim's (1996) results, which revealed that stock price volatility and dividend yield are unrelated. According to the findings of this research study, the dividend yield has the greatest impact on stock price volatility, as measured by standard deviation, i.e., the unsystematic risk among predictor variables.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:umu-195496 |
| Date | January 2022 |
| Creators | Massawe, Innocent, Kumar Das, Avijit |
| Publisher | Umeå universitet, Företagsekonomi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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