Ex-Dividend Price Behavior of Common Stocks, Review of Financial Studies
This study examines common stock prices around ex-dividend dates. Such price data usually contain a mixture of observations - some with and some without arbitrageurs and/or dividend capturers active. Our theory predicts that such mixing will result in a nonlinear relation between percentage price drop and dividend yield - not the commonly assumed linear relation. This prediction and another important prediction of theory are supported empirically. In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop has been an excellent (average) rule of thumb.
John Boyd, Ravi Jagannathan
Boyd, John, and Ravi Jagannathan. 1994. Ex-Dividend Price Behavior of Common Stocks. Review of Financial Studies. 7(4): 711-741.