Dividends in the Czech Capital Market and an Optimal Investment Strategy

The average dividend yield on the Czech capital market from 1995 to 1999 was 4.8%. Stocks with high dividend yields (>5.5%) exhibited non-rational price pressures after their ex-dividend date. The average over-the-period return in the four days following the ex date was negative 4.7% ? stock prices continued to fall even though the stocks were bought without dividends. Short-term investors therefore suffered a capital loss that was greater than both the net and gross dividend paid. Simulated investment strategies suggest that it is reasonable for an investor to collect dividends on low-dividend-yield stocks (