Andrew B. Ainsworth

Publications (5)0 Total impact

• Source

  Available from: SSRN

  Article: Ex-Dividend Trading Deadlines and Limit Order Book Liquidity

  Andrew B. Ainsworth, Adrian D. Lee
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  ABSTRACT: This study examines whether the expected waiting cost incurred by traders between order placement and execution impacts market resiliency and bid-ask spreads around a stock’s ex-dividend date. Our setting is unique as the tax-induced wedge in traders’ valuations motivates liquidity trading, while the market close on the cum-dividend day represents a deadline that leads to an exogenous change in waiting costs. Consistent with predictions, order placement is more aggressive before stocks begin trading ex-dividend. Stocks with higher expected costs of delaying execution experience larger declines in order aggressiveness from the cum-day to the ex-day. Waiting costs also impact effective bid-ask spreads, which fall on the cum-day before rising by 37% on the ex-day. This spread increase is positively associated with differences in subjective valuation. Our results provide empirical support for recent theoretical models of limit order books.
  Capital Markets: Market Microstructure eJournal. 03/2011;
• Source

  Available from: fma.org

  Article: Taxes, Price Pressure and Order Imbalance around the Ex-Dividend Day

  Andrew B. Ainsworth, Kingsley Y. L. Fong, David R. Gallagher, Graham Partington
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  ABSTRACT: Price pressure exists around the ex-dividend day in Australia between January 1995 to April 2003. By examining stock returns, trading volume and order imbalance we show that long-term investors accelerate trades to the cum-dividend period and short-term traders target fully franked, high dividend yield stocks with a small bid-ask spread. Multivariate analysis shows that franking credits possess a positive value for the majority of our sample and that transaction costs act as a significant impediment to the adjustment of prices in the ex-dividend period. Our results also provide insights into the effectiveness of changes in tax legislation. A holding period rule reduces the amount of short-term trading from July 1999. The introduction of cash refunds for unutilised franking credits from July 2000 entices investors to adhere to the holding period rule. These results show that changes in the tax code have been effective.
  Capital Markets: Market Efficiency eJournal. 12/2008;
• Source

  Available from: 69.175.2.130

  Article: Institutional Trading Around the Ex-Dividend Day

  Andrew B. Ainsworth, Kingsley Y. L. Fong, David R. Gallagher, Graham Partington
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  ABSTRACT: WThis paper uses the trading records of institutional equity funds to examine their ex-dividend trading behavior. There are two classes of funds in the study, which differ in their tax-induced preferences for dividends. The funds engage in both short-term and long-term trading about the ex-dividend date. In aggregate, the funds make excess sales cum-dividend and excess purchases ex-dividend. The availability of imputation tax credits, changes in tax incentives and the fund’s tax status all affect ex-dividend day trading as does the level of dividend yield and transaction costs.
  Behavioral & Experimental Finance (Editor's Choice) eJournal. 08/2008;
• Source

  Available from: SSRN

  Article: Style Drift and Portfolio Management for Active Australian Equity Funds

  Andrew B. Ainsworth, Kingsley Y. L. Fong, David R. Gallagher
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  ABSTRACT: Using monthly active equity fund portfolio holdings, we examine the magnitude of style drift and decompose it into active and passive components. We find that while fund style tilts are consistent with their self-stated investment objective, there is variation in the degree of style bias within style groups. We document that funds actively adjust their portfolio holdings in response to passive style drift to retain a desired portfolio tilt. The degree of adjustment varies with the frequency over which the drift is measured, with funds being most responsive to changes in book-to-market and momentum drift. We also find that certain types of style drift affect portfolio turnover.
  UNSW: Banking & Finance (Topic). 08/2007;
• Source

  Available from: efmaefm.org

  Article: Ex-dividend Day Bid-Ask Spread Effects in a Limit Order Book Market Setting

  Andrew B Ainsworth, Adrian D Lee
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  ABSTRACT: Liquidity and transaction costs are key considerations in short-term trading strategies. Literature on ex-dividend day trading however seldom considers bid-ask spread magnitudes. We find the effective bid-ask spread increases substantially on the ex-dividend day for stocks in the limit order book setting of the Australian Stock Exchange. We attribute the higher spread to: i) a reduction in the cost of delaying execution, ii) an increase in the proportion of impatient traders and iii) uncertainty about the ex-dividend price drop. These effects result in less aggressive limit orders and thereby higher spreads on the ex-dividend day, consistent with predictions of dynamic models of the limit order book. Dividend yield and franking credit level are also positively related to the ex-dividend spread increase as a result of differences in trader valuations. Our results indicate that the actual profitability of traders utilising a dividend-induced trading are likely to be lower after considering the higher spread.