1. Discussant: Ji-Chai Lin Louisiana State University 2008 NTU Conference on Finance, Taipei

2. Motivation and Hypothesis Motivation: The authors propose a new explanation for abnormal returns on ex-dividend dates. They hypothesize that since ex-date is a high-publicity event, it attracts attention of small investors and move stock prices. Thus, they argue that abnormal returns would exist even when there is no tax and no price discreteness.

3. Predictions Their attention hypothesis predicts that media coverage will be higher, small investors will buy more, and the return will be higher on the ex-date when (1) the amount of the stock dividend is larger and (2) investor sentiment favors that particular stock.

4. Findings Small investors are significant buyers on ex dates. Their purchases are higher for high attention stocks, i.e., stocks with high distribution rates, high investor sentiment, or high media coverage. High attention stocks tend to have higher ex-date returns. The results are consistent with the attention hypothesis.

5. General Comments This paper is well written, and empirical analyses are carried out carefully. The results are interesting. The authors rule out alternative hypotheses

6. Just a Thought Why would small investors prefer to buy stocks paying high stock dividends or with high M/B at ex-dates? Could it be that because of their budget constraints, they buy “good” stocks (as proxied by high stock dividends or high M/B) within their budgets?

7. Market Microstructure and the Ex-date Return Conrad and Conroy (1994, JF) This article examines the role of order flows in abnormal split ex-day returns. The authors conjecture that postsplit orders consist of numerous small buyers and fewer larger sellers, causing closing prices to occur more frequently at the ask price. They find that order flow biases can explain approximately 80% (48%) of the NYSE (Nasdaq) ex-day returns. The idea is similar! This could provide a motivation for the paper as an extension to Conrad and Conroy’s (1994) study.

8. Final Comment Overall, I enjoy reading this paper. I hope my comments are useful. And, I wish you the best.