1
$\begingroup$

I am reading some lecture notes on asset pricing, and they use the term "ex-dividend" price of an asset. I googled and found that ex-dividend means the time between announcement and payment of a dividend.

So, what does it mean by ex-dividend price? What does the word 'ex-" refer to?

Thank for your help in advance!

$\endgroup$
2
$\begingroup$

When a firm announces a dividend, it pledges to pay a given amount at a given date ($t_p$) to its stock holders. As traded shares may change hands frequently, the firm defines who has the right to claim the dividend as the shares owners at a given date ($t_e$), that usually is some date between the announcement date and the payment date. During the $t_e$ to $t_p$ period, the stock can trade, but its buyers won't have the right to receive the dividend, even though it hasn't been paid yet. This is why we say ex-dividend, because the share has no longer attached the right to claim the next dividend.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.