MASTER NEGATIVE NO. 95-82473 COPYRIGHT STATEMENT The copyright law of the United States (Title 17, United States Code) governs the making of photocopies or other reproductions of copyrighted materials including foreign works under certain conditions. In addition, the United States extends protection to foreign works by means of various international conventions, bilateral agreements, and proclamations. Under certain conditions specified in the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of these specified conditions is that the photocopy or reproduction is not to be "used for any purpose other than private study, scholarship, or research." If a user makes a request for, or later uses, a photocopy or reproduction for purposes in excess of "fair use," that user may be liable for copyright infringement. The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: Kulp, Clarence Arthur Title: The discounting of dividends by the stock Place: Philadelphia Date: 1923 rv wmm m. xw^frnfc' ^'■92^-)?>-\ COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET MASTER NEGATIVE * ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD Business 785 K95 » ■ ■! — ' M ' mm asa Kulp, Clarence Arthur. The discouiitiug of dividends by the stock markets Westbrook pubhshing co.] 1923. ^ 100 p. incl. taU^ 23**, Thesis (PH. D.)~-University of Pennsylvania. Bibliography: p. 100. 1. Stock-exchang^U. S. 2. Securities-U. S. 3. Stocks. i. Title. ^\ ryr........ .... 24-12133 Library of Congress Copyright A 794020 HG4636.K4 1923 rs24c2i -^L^ RESTRICTIONS ON USE: TECHNICAL MICROFORM DATA FILM SIZE: ?).^\fWVY\ TRACKING # : REDUCTION RATIO: ^ IMAGE PLACEMENT: lA fllAj IB IIB DATE FILMED: M-l^-^S INITIALS :M (n^H 6$ti3 FILMED BY PRESERVATION RESOURCES. BETHLEHEM, PA. BIBLIOGRAPHIC IRREGULARITIES MAIN ENTRY: Kulp. Clarence Arthur The discounting of dividends by the stock markets Bibliographic Irregularities in the Original Document: List all volumes and pages affected; include name of institution if filming borrowed text. .Page(s) missing/not available: yolume(s) missing/not available: X Illegible and/or damaged page(s): table of contents Page(s) or volume(s) misnumbered:. Bound out of sequence: Page(s) or volume(s) filmed from copy borrowed from Other: TRACKING*: MSH05133 > ^^ ^ B X cob? CJI CT>X KJ-< 00 M (ji 3 > DO Q, O o m (DO ^ o o <—'(/» :::d N X A^ ^, A^' ^^ ^^^ ^^^7^ lO o o 3 3 U1 o 3 3 A^ > cn «I^. a^ "^s^:^. o o 3 3 to O ffi^i^npi^KHI? i ^ 00 ho bo a- 00 lb I ro In 1.0 mm 1.5 mm 2.0 mm ABCOEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 ABCOEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyzl234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 ^o 2.5 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 V «« s*' r^ To fo ?cP ?^ ^^ € C^ c^ <:^ cSr-^^^^^ fo i= 'fo> m H O O "o m "o > C oi> I Til ^ 0(/) ; m o m A. •^> c^ 'l^ ■r '^^ ^ ^«- ^^ ^ t> ■fvr (Ji 3 3 ft ll s O 9 3 13 4^. /!► /!> I $ I ■ m^ '!^ ' r^^ ■■Hi' i i ; ■jjBjK r' " 1 H I UNIVERSITY OF PENNSYLVANIA THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET BY CLARENCE ARTHUR KULP r A THESIS PRESENTED TO THE FACULTY OF THE GRADUATE SCHOOL IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY PHILADELPHIA 1923 '5T«s ^^ Columbia Winibtviity in tde Citp of Beto f^orfe LIBRARY School of Business 1 \ I THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKETS. A THESIS PRESENTED TO THE FACULTY OF THE GRADUATE SCHOOL IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY BY CLARENCE ARTHUR KULP PHILADELPHIA 1923 Copyright, 1924 By Clarence Authur Kulp U TABLE OF CONTENTS I PAGE The Theory of Stock Market Discounting II The Discounting of Cash Dividends ^^ III The Discounting of "Rights" and Stock Dividends 49 .'I!..'''* IV % Resum6 5* Appendic. Appendix A. Stocks Announcing Cash Divi6^^ 61 Appendix B. Cash Dividends. Original ItemU Classified According to Degree of Discounting Effectiveness 65 Appendix C. Stocks Declaring "Rights" and Stock Dividends 92 Appendix D. "Rights" and Stock Dividends. Originalltems: Classified 95 According to Degree of Discounting Effectiveness Bibliography 100 THE DISCOUNTING OF DIVIDENDS B^ I HE S20CK MARKEl Chapter I THE THEORY OF STOCK MARKET DISCOUNTING ^0 ,y r The General Meaning and Scope of Discounting Those interested in organized stock exchanges and their functions claim for the stock market a very valuable function, that of discounting. By "discounting" is meant the faculty of predicting future events, general and specific. It is said, for example, that general business conditions are forecast by this market mechanism, much in the same way that a barometer forecasts future atmospheric changes. The trend of stock prices, while rising in response to the influence of business prosperity, rises in advance of the actual materialization of the prosperity itself. While stock prices are a result of the interaction of numerous price factors, such as the level of commodity prices, the current interest rate, and the position of business in general in the trade cycle, stock prices anticipate this interaction of forces which produces them. Before the price factors make themselves generally evident, they are estimated, and their effect on the prices of various kinds of stocks gaged. ^ Discounting by the stock market is said to be made possible because those who make a business of trading in stocks are to a large degree specialists. It is impossible for one man or for one group of men to be informed exactly regarding all the « "Although the trend of stock prices moves ahead of the trend in general conditions. It i« nevertheless an effect and not a cause of the improvement or depression that it precedes. Stock exchange transactions are valuable solely as representing the general opinion as to the course of events and not as a factor with direct influence upon succeeding developments." David F. Jordan, "Business Forecasting," pp. 168-171. "Thus prices in an organized market adjust themselves through the forces of supply and demand almost automatically and usually in advance, to changes in the basic values. . . . As a rule, owing to speculative factors, prices will rise before the rise in values occurs, or will decline before values actually diminish." J. Edward Meeker, "Work of the Stock Exchange," p. 386. "When the event actually happens, it results in no great disturbance to values as was ex- pected. Is it not better that this discounting of future possibilities should occur — that the effect of a given cause acting upon the market should be felt by graded steps instead of coming like a cataclysm?" Charles A. Conant, "Wall Street and the Country," pp. 95-96. i THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET securities dealt in on a large exchange. Therefore, traders have devoted their efforts to particular classes of securities- some speciahze in steel stocks, some in railroad stocks, some in industrials of various kinds. Since by far the greater part of the transactions on such a representative exchange as the New York Stock Exchange are speculative in character,* that is are operations of professional traders, security prices represent largely the composite estimate of experts.3 The continuous nature of the stock market, due to the presence of a sufficient number of buyers and sellers on each business day to insure constant quotations of prices on listed securities,4 contributes to the success of the market in exercising the discounting func- tion The value of stock-market opinion, no matter how expert, would be decreased tremendously if expressed in price quota- tions only infrequently. But not only is it said that the stock market furnishes expert opmion as to the value of securities, it is said to furnish this opmion in advance. These market opinions registered in the form of stock-price quotations are based not on conditions of the moment, that is, on current price factors; they are attempts to estimate and measure the effect on various kinds of securities of future conditions not yet generally and piiblicly known. Speculators are said to be a highly informed group of business men, possessing and utilizing information unknown or un- noticed by the general public. They are said to be acting usually ; "f ^^^ »;°"P (of speculators) pursues its own object and renders its particular service y^the combined effect of their efforts is a huge increase in the volume of transacdl on he market. S. S. Huebner. "The Stock Market," p. 22. if ZI^^ T''*' '' ''''' "''^ ^ *^"°^" P'""«^"« ^''^^' ^"^ '^^Jther in the wind. As a whole it represents a senous. well-considered effort on the part of far-sighted and well-infrrm«i men to adjust prices to such values as exist or which are expected to exist in the not t«, reLo^ future. S. A. Nelson. "The A. B. C. of Stock Speculation." p. 44. "This prophetic quality of stock exchange prices is imparted to them by the invariably accurate group judgment of thousands of buyers and sellers throughout the nation Teg^i^ mg future or prospective values." J. Edward Meeker. "The Work of the Stock E^JilLn^?^ J"t "'T'T^'^'^^l^''^ "^"^ ^ ^^^""^ ""' °°^ ^^«^« ^"y security listed in that market may be bought and sold at any time during business hours at comparatively sma 1 varTat on. from the current price." S. S. Huebner. "The Stock Market." p 2? variation. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET ahead of current conditions — sometimes anticipating events as long as two years in advance. * It is not intended to imply that the mere fact of specializa- tion in speculation explains discounting completely. No matter how closely the speculator follows his particular stock or class of stocks, as an individual he is not infallible. Discounting, while depending basically on more or less precise information, is the expression of group judgment rather than of individual judgment. The controlling factor, naturally, is the element of information, since the average judgment of the uninformed would be of practically no value. It is of importance to note that the events which the stock market claims to discount are of only two kinds. They are, first, those events which are general in character, as the general conditions of business, which are major price factors and are susceptible of prevision; second, specific events in the market itself, such as announcements by a corporation of its intention to pay a cash dividend, or to issue to its stockholders "rights" or privileges to purchase additional shares of stock. Certainly the market does not claim foreknowledge of every event, par- ticularly those of minor importance and accidental in character. For example, it is pointed out that the panic of November, 1907, was indicated by the stock market as early as October, 1906, when general stock prices began to drop rapidly, despite a bustling period of prosperity generally. When the panic itself occurred, the market not only was not caught unawares, but was already starting upward. The panic had been dis- counted and its effects had been liquidated in the stock market a year before. Again, the stock market began its recovery in November of 1907. General business conditions showed no improvement until a full year later. The most recent illustra- tion of discounting cited is the action of the stock market after the war. As early as November, 1919, stock prices declined, in face of the tremendous boom of after-war prosperity through- out the whole country. Business in general did not begin to > "Without an exception every business depression or boom in this country has been dis- counted by our security markets from six months to two years before the dull times or pros- perity became a reality." S. S. Huebner, "The Stock Market," p. 36. 8 THE msCOVNT.^a OF D.V.UENDS BY THE STOCK MARKET ji I liquidate until the spring and summer of the next vear Ann. ently the stock market had expected thltT a ^^ come, and had registered that^^ati 'n" ^Wt" mT stock-market prices reached their lowest poin^ fn 2 H ' in genera, bulr'" dtr nT utr;9T?■rH"^""'°" « begin to show signs of ^tl^ 1'; Jireo""^'"^^^ '" ve^ cl^e connt'* ''" ? "'' "" *"^^°-* events having a seclitts T, ^'^f' P^'-'i^lar securities or groups of tr;rLu:trTto\rrer^.HgS^^^^^^^ iilustration of a stock-markeJ^Lt :t h is" is^co^S^ *Vh: announcement of a corporation's intention to p" £ regll, Ixpecled. "'''"''"" " *'^^' ^'^^ announcement is fully The Literature of Stock Market Discounting the oneratinn ^t tu- ■ market. Proofs of e operation of this important function, however are ron con...... . ™, coSSr^o' j;.r,L"Li.:;." t An.l.„e. cTZiil^^.l:^::^:^;-:^'''''''^- «='-"•' S.a..tlca, OrganUation. business conditions provides P "ro^d sc„u« ^6^::^'"''"?'"''^ ^'°^^ "*'' -« «---' Research. Harvard University, Cambridge Mass' "'' <=°»""«« <>" Economic P. 2?2^rAl:t|De»TnrL'„1"c:o.r '"Ih^ ^''"'""■"' ^°"- -■'C-^-^-^ Vo,. IV -urea by .Mr. Mears artlli^^^ tolhis s ^1': c"'^ ""."'t" ™'^- -^"^ '^^^' «vuicu ui tms study are compared in Part III. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET • SO little Study. In the great majority of cases in which dis- counting, general or specific, is discussed, writers are content to support their claims with general or isolated illustrations.' Often statements are made and no exact proof of any kind is submitted.'*' Scope of Present Study It is the purpose of this study to test the validity of the claim that the stock market discounts. Since the subject of the dis- counting of general business conditions, as contrasted with the discounting of specific events, has received by far the most attention at the hands of students, the present study will be confined to an examination of the discounting of specific stock- market events. As a type of specific event closely connected with the stock market, the discounting of dividends will be investigated. Dividends are of two general kinds: (1) Cash payments. (2) Allotments of additional stock. This disburse- ment of additional stock may be either at a fixed price per share to the stockholder, usually below the market price of the stock already on the market, in which case the right to the dis- bursement is called a stockholder's right or privileged sub- scription; or it may be given the stockholder with no charge whatever, when it is called a stock dividend. A stock dividend is simply a privileged subscription given free of charge. With- out entering into the details of the advantages and disadvantages to the shareholder of the issuance of rights and stock dividends, it is sufficient to say that the disbursement is valuable, if at all, because the shareholder expects either a continuation of the usual rate of dividend on the increased number of shares, or a total dividend (net rate of return) on all the shares, old and new, greater than the return on the old shares. It should be added that in the cases of certain stocks, issued by corporations having favorable possibilities of future expansion, the privilege to sub- scribe may be valuable primarily, as a chance for large future •See David F. Jordan. "Business Forecasting." pp. 16S-I71. Also J. Edward Meeker. "Work of the Stock Exchange." pp. 386-388. Also Charles A. Conant. "Wall Street and the Country," pp. 95-96. " See Charles A. Conant, op. cit. Also David F. Jordan, op. cit. 10 THE D.SCOV^rmc OF VIV.DESVS BV THE STOCK MARKET chances on receivi„X^oLrre;;tut '^'^^"' ^"' '^'' diSe'nrrnTrX,"' ?' ''?'""** "^ non-payment of cash ably thetrittrn".^^^^^^^^^ - P-b- Every business day in theTear I-'^'T '" '^' ''"^^ '"^^''"• the country decide lo rl^ ' T'^' °^ corporations all over increase it^o rSuce t oTtn ' •'''" "'""' ^'"'^^"^^ '^'^' ^o ment or non-payment-arl the tl«? P^bab.ht.es of their pay- the prices of stock, Th^iT,^?^'* ""^'^ ^^*=t«^ influencing eamfng Iwer^f th. "^'"^ '^ ^''^ '"^^'^"'^ ^^i^f test of tion. ? ":nC^:;Xnrrorih:tr^^^^^ orrrri^==rstt~™^^ steadily. .itHou, a^^nc^ 2^ 5^^^.^"--^ --'- that h:^^StX?" ^"-- ^ven though it is proved crease in dSend t tTT *'' ^""°"«<=--ent of an i„- dends are discounted m =. " /• '^ ^° ^"""^ that divi- of cases is vaTuabie Lut Th"" r^'"-^^" °^ '''^ *°*^' """"ber acter. BusS s L „" tor'tr*"" /' "^^^*'^^ '" '^''- notonly«,Ae/Aeror««/'H^ !' r =P^<^"'^tor wish to know of the stock market buT^, ^°^ '"^"^^ "^^"*^ '^ ^ f"""'"" they can take adtl.^i'g: of'^^^^^^^^^^ scope of the nrpsont „t„j. t. t """""g. ineretore, the I r,ri!^ -^ . "^^ ^^^ b^^" ™ade fourfold: 1. Cash dividends (subject matter of Chanter U)- f„^ tu yZV'T'''' '^'''^^^ '' '^^ stock'Srkef Ir pit «cA rf«c.«„/.„g,. or Wa;i«li ^''^/PP'-'fnate /.V«. <,/ foretell the eve^t? "^ '^""*'' ''°'' ^''^ ''"^^ ""^--ket IIIV 1?^^T,.°!f ^'"^V^''^''"^^ (^"''J^" matter of Chapter 111) • (a) The degree of discounling efRciencv (h^ Th^ '-"^Pt^^ mate time of suck discounting. ^ ^- ^ ^ ^^^ ^PP''^^" THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET 11 Chapter II THE DISCOUNTING OF CASH DIVIDENDS A. The Degree of Discounting Efficiency. Introduction.— As has been indicated in the previous section, the announcement of the payment or non-payment of a dividend is probably the most important single event taking place in the stock market. There is a direct, constant and gradual effect of dividends upon the prices of stocks. From one ex-dividend date until the next, all other things being equal, the price of a stock should be increased daily by the amount of the dividend accrued. Stocks are sold inclusive of the accrued dividend, and one indication that speculators believe that the stock market discounts the payment or non-payment of a dividend is that stocks are sold "flat." This is exactly the opposite of the procedure in this country with bonds, which are sold "with interest," or in other words, with interest added from the last interest date." The test to determine the dis- counting or non-discounting of a dividend announcement is whether there is any considerable reaction in the price of the stock upon the announcement of the dividend. (By the term "reaction" as here used, is meant any price movement indicat- ing that the announcement is not completely expected. For example, a reaction in the case of an announcement of dividend increase would be a sharp rise in the price of the stock.) The day of the announcement of the dividend must not be con- fused with the ex-dividend date. The official announcement of the dividend by the corporation specifies the date on which the stock will sell ex-dividend, that is, exclusive of the dividend. The ex-dividend date is the day of record as of which stock- holders whose names appear on the transfer books of the cor- poration are entitled to receive the dividend announced some * The only exceptions to this rule occur in the case of income bonds and defaulted bonds. / X 12 THE mscovmmc of d.vwesds by the stock market thp Pv^T,^^ ^ *• • ^"^^ ^"^ occurrence or non-occurrence of the stock wilffln h U "'y "'" °" ^'''^ d^t« the price of situation correctlv int hi ^^ "T-*''''^* ^^ diagnosed the has been ZZl' ■ T ^""^"'^ ^ '^^''^^'"^ «"d the dividend forl'c Jter 'n7 H^Tr '"^^ '^'^^"^>^ ^^ '^' ^'^^^ "^^^^^et as a analyse h. '""^ announcements, it is not essential to o^ Ti s:dTTn:e"r^r'^ ^~^^"^ ^^^^^-^' th;,t th. .!f 1 ^' ^'''" ^^^ ^ss^"ce of discounting is timthe actual announcement of a dividend causes no surprfse ' •Regular way delivery, the most usual contract. if theday of theannouncemenUskTurday the^avr " '^" '°^ '^"""«- ^^ «^-Ple! «This statement has no referent [ft he tn, .'1' ^°°*^""«'"e«t would be Monday ^liacussed later. "* '° ^''* '''^^^^"' ^^ determining the r,m. of discounting THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 13 The most important task in testing the validity of the theory that the stock market discounts dividends is to ascertain what happened to the price of the stock on the day of the announcement. But the full effect of an announcement might not evidence itself until the day after the announcement, due either to the publication of the announcement after the close of the stock exchange for the day or to the fact that a stock with a narrow market might not adjust itself as rapidly to market conditions. Therefore, the price behavior of a stock on the day after the announcement also is important. These then are the two essential days for which price data have to he collected. ^ In addition, the prices of dividend announcing stocks three days before the announcement are used in this study simply to establish a standard of comparison or base in calculating an index number of stock prices. ^ Likewise the prices on the day before the an- nouncement are used in order to calculate the amount of price increase or decrease on the day of the announcement over the previous day. The result secured is a picture of the behavior of the dividend announcing stock at the time of the announce- ment of the dividend, the changes on the two days referred to expressed as percentages of the price of the stock three days before the announcement. General method of analysis. — The original data which form the basis of this part of the study consist of one thousand (1000) announcements of cash dividends on common stocks. Common stocks are used because of their admitted greater sensitiveness to market conditions. Preferred stocks, having certain characteristics making them more like bonds than stocks (senior rank as stock, sometimes the cumulative dividend feature, etc.), are considered not nearly as satisfactory as market indicators. Of the total, one-half, or five hundred (500) are announcements that the usual rate of dividend is to be con- tinued. This class of announcements is included for several reasons. First, it constitutes by far the most usual kind of » Perhaps this question arises: Why stop with the day after the announcement? The an« swer is that if the study is carried beyond this point factors connected with future dividend! are increasingly likely to enter to complicate the analysis. See pp. 37-38. • See pp. 15-17. H:f 14 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET announcement, and even though, a priori, it may be reasoned that the discounting of such announcements is perfect or nearly so ,it is worth while knowing just how effective the discounting is. Second, even though this is the most usual type of announce- ment, it is not always a foregone conclusion that the usual dividend will be continued; there is present the element of chance, especially in periods of "boom" and depression, that the former rate will be increased or cut. Finally, and by far the most important, the time of discounting (that is, the amount of advance notice given by the stock market as it forecasts the coming event) is perhaps as valuable in the case of continuation of the usual rate of dividend as in the case of changes. To know when the stock picks up in price the greater part of the approaching dividend in one sense is more valuable in the case of dividend continuations, because of the very fact of their numerical preponderance. The remaining five hundred (500) -are announcements that the former rate of dividend is changed; three hundred (300) that the dividend rate is increased over the previous rate; two hundred (200) that it is decreased.' This data represents 186 stocks^ and the dividend history of almost every important corporation in the United States for almost two decades. The stocks are (or were, at the time of the announcement) listed on one or more of six of the leading stock exchanges of the country — the New York Stock Exchange, the New York Curb Market, the Boston Stock Exchange, the Philadelphia Stock Exchange, the Chicago Stock Exchange, and the Pittsburgh Stock Exchange. Naturally, the great majority represent I *f J »The exact dates of the dividend announcements are not available, except in a few out" standing cases, in the columns of financial newspapers and magazines. For example, the Commercial and Financial Chronicle each week prints a very complete list of the dividends declared during the previous week, but the precise date is lacking. This information is found, as far as the author has been able to ascertain, in one source only, the daily news bulletin. From the files of the Philadelphia News Bureau was secured the list of 1000 dividend announce- ments referred to above, covering the period 1904-1922, inclusive. The value of this type of financial publication as source material is twofold: First, it is absolutely up to date in its news service; second, its reports of directors' meetings and their dividend announcements are very complete and reliable. • See Appendix A. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET IS stocks listed on the New York Stock Exchange, the largest stock market in the United States.' Once having secured the list of dividend announcements, the next step was to secure the prices of the dividend announcing stocks on the four days mentioned previously. Most of the stock-price quotations required are available in the Commercial and Financial Chronicle. However, since the Chronicle during a part of the period at least did not print daily prices for all the exchanges represented in the study — notably the New York Curb — the remaining quotations were secured from the Wall Street Journal. The price behavior of each of the 1000 dividend announcing stocks is analyzed in the following manner: The high and low prices of the stock on each of the four days mentioned previously are averaged and considered as the price of the stock. Using the average price of the first of the four days as a base, the prices on the remaining days are expressed as percentages of 100 per cent. Thus it is easy to compute the amount of change in price on the day of the announcement and on the day after the an- nouncement. For example, if the average prices of Stock A are as follows: January 2 $90.50 January 4 90 . 75 January 5 90. 50 (the day of the announcement) January 6 90. 00 (the day after the announcement) these prices converted into percentages of the price on the first of the four days are : PER CENT CHANGE January 2 100.0 January 4 100.3 Januarys 100.0 -.3 January 6 99 . 3 — . 7 or a net decline for the two days of 1.0 or 1 per cent. * Following is a summary of the stocks classified according to the exchange on which listed: New York Stock Exchange 159 New York Curb 11 Boston Stock Exchange 8 Chicago Stock Exchange 4 Philadelphia Stock Exchange 3 Pittsburgh Stock Exchange 1 186 16 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 17 It is not possible, however, to determine the action of the stock at the announcement of the dividend without taking into consideration one other very important factor: general stock market influences. Up to this point no attempt has been made to ascertain the effect of general stock market con- ditions on the price behavior of a particular stock. Stock A, a steel stock, may drop in price at the time of the announce- ment, not because of the effect of the announcement itself, but because steel and industrial shares in general decline as a class and carry Stock A with them. If this general decline takes place, it is not correct to say that Stock A drops in price; Stock A's decline may be explained completely by the general drop, and in fact, if the general decline is greater than the decline in Stock A's price. Stock A relatively increases. In order to calcu- late the influence of general market factors on the prices of individual stocks, an index of general stock prices is necessary. Then it is possible to compare the price fluctuations of the specific dividend announcing stock with the general stock price level, determine the effect of the latter upon the former, and thus isolate those price changes due to the announcement alone. The price changes of a certain stock at the time of an announcement can be explained then in terms of that announce- ment alone, uncomplicated by general market influences. The influence of the general level of stock prices is calculated as follows: An index number of general stock prices" is con- »• The average daily prices of industrials and railroads compiled by the Wall Street Journal are the basis of the index. These daily averages are expressed in dollars, and are the sole published average of daily stock prices. Following is the list of stocks making up each of the two averages: Rails Atchison Baltimore & Ohio Canadian Pacific Chesapeake & Ohio Chicago, Milwaukee & St. Paul Delaware & Hudson Denver & Rio Grande (pfd.) Illinois Central Kansas City Southern Lehigh Valley Louisville & Nashville Manhattan Elevated Rwy. Minneapolis & St. Louis Industrials Amalgamated Copper American Can American Car & Foundry American Locomotive American Smelting & Refining American Sugar Refining American Tel. & Tel. Baldwin Central Leather Corn Products General Electric Goodrich Republic Iron & Steel structed in the same manner as is the index of prices for each particular dividend announcing stock, explained on previous pages. A comparison of the price changes of the dividend announcing stock with the changes in price of similar stocks, for the same days then makes possible the measurement of the influence of the latter on the former. For example: DIVIDEND ANNOUNCING STOCK 1 GENERAL STOCK PRICES PER CENT CHANGE PER CENT CHANGE NET CHANGE Jan. 2 Jan. 4 Jan. 5 Jan. 6 $90.50 90.75 90.50 90.00 100.0 100.3 100.0 99.3 • • • • -.3 -.7 $65.12 65.18 64.25 64.25 Net cha 100.0 100.9 98.6 98.6 nge both -1.'3 ±0.0 days. . . a • ■ • -f'l.o -0.7 +0.3 In this illustration, the dividend announcing stock declines in price on January 5th, the day of the announcement, but this decline is fully explained by a much greater decline on the part of stocks as a whole. In fact, relatively Stock A has risen on January 5th, since its failure to decline as much as the group must be ascribed to a specific influence. The action of the dividend announcing stock on the day after the announcement, however, is contrary to the trend of the group, and is a real decline, due to the operation of a factor influencing the particular stock alone. Thus there is a relative increase on the day of the announcement, which is partially offset by a relative decline on the day after the announcement. The net change of the dividend announcing stock thus is an increase of three-tenths of 1 per cent. {Continued from page 16) New York Central New York, New Haven & Hartford Northern Pacific Pennsylvania Reading Southern Rwy. Union Pacific Studebaker Texas Company U. S. Rubber U. S. Steel Utah Copper Westinghouse Western Union ^r' 18 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET Having analyzed the price behavior of the 1000 announcing stocks, It IS next necessary to set up tests or standards of dis- counting. Then if the price variation of a stock falls within cer- tain limits, in other words, complies with the conditions of the tests to determine discounting, the announcement may be said to be discounted. It is not intended to set up arbitrary standards, as will be discussed later, but to lay down common-sense rules based on observation of the market itself. The tests of discounting.— The discounting function of the market as regards the announcement of cash dividends is demonstrated if the price behavior of the announcing stock on the day of the announcement (and on the day after the an- nouncement) complies with or falls within the scope of any one of the following three tests: « (a) The test of perfect discounting. {b) The test of over-discounting, (c) The test of effective dis- counting. (a) The Test of Perfect Discounting Irrespective of whether the announcement is of an increased or decreased dividend or that the dividend will remam the same, a dividend is discounted perfectly when, on the day of the announcement (and on the day after the announcement)," the action of the dividend announcing stock IS exactly the same as the action of the general level of prices of similar stocks. The effect of the announcement is nil. The results of the announcement are completely calculated in advance by the market. Whether the general price level rises, falls or remains the same, the dividend announcing stock conforms perfectly to the price behavior of the group with which it is related. The price behavior of the announcing stock is ex- plained perfectly by the influence of the general factors, affecting «r ' J !!. u '*'* "^^^''^ "^'^ '^* ^"*''''°° " '° «'*^'^«' dividend announcements are accounted or not. that is. the percentage of cases in which the market discounts Aether and perhaps more important question will be discussed in detail in later pages: How far ah'^ does this discounting take place? *~s«. auwjuraneaa " Hereafter, in the sections on the tests of discounting, whenever the phrase, "the day of Is a,:o"undero:^! " ""'' ''' '"^^^^^^-^ ^^^^' "the day after fhe anJncement " THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 19 all stocks of the same general class alike. The special factor, a dividend announcement, had no effect whatever. (b) The Test of Overdiscounting Announcement of an increase in dividend. — The an- nouncement of an increase in dividend is discounted : (a) When the dividend announcing stock declines in price, the general level of stock prices remaining the same; or (6) when the dividend announcing stock declines in price, and the general level of stock prices rises ; or {c) when the dividend announcing stock declines in price to a greater extent than the decline of the general stock price level, or {d) when the dividend announcing stock rises in price, but less than the increase in the general level of prices. A dividend announcement complying with any of these con- ditions would be overdiscounted. For example, let us take sub- division "(^)" of the above set of conditions. Suppose that the general price level of similar stocks rises from 100 per cent to 102 percent; the price of the dividend announcing stocks rises from 100 per cent to 101 per cent. The special (dividend an- nouncing) group thus fails to respond completely to the general price movements of its class. One might reasonably expect the special group to rise at least as much as other stocks of its kind. For the dividend announcing stock to rise considerably more would indicate a failure to discount since it then would be evi- dent that a special factor, a dividend announcement, is operative, and is causing a price bulge not characteristic of the class of stocks as a whole. But to increase less than the general price level indicates that the announcement is just the opposite of being unexpected. The news of the announcement, instead of causing a rise in price, causes a relative decline. In a market comprising besides informed speculators, numbers of uninformed buyers, it is not reasonable to expect perfect discounting. In fact, all that students of the stock market claim for discounting is approximate accuracy. In other words, by their very ignorance of the discounting function, the uninformed are likely to inflate prices slightly previous to the day of the announcement. By purchasing stocks just before the date of the dividend announce- 20 THE DISCOUNTING OF DlVIDFNn^ nv -r^tyr. ^ ur uiviDENDS BY THE STOCK MARKET I sell at thrJubl -V TT""'"* '" " ^■«"^' *° speculators to Announcement of a decrease in dividend Th» , rise in fh» „ i . '^ *° ^ greater extent than the rise in the general stock price level; or (d) when the diviHpnH t^r^^rS^ZjtS^:^^^-' --- -nr Ich" riv at th. '^"'"'""^ announcing stock increas;s »-e^;we/>- at the announcement of the so-called "bad new, " Tn tad^'of 'u""''* '" ^"*""P^*«^ ^•'^ announcemenHnd TurtLt svi'^sf o7 tra"'""^' ''' ^^'^^ ^-- rr^Q*. i« /'^ !i . . ^"^ announcement of the in- cTs^re^veit Ih^r ^f S ""^ *"" ^"^ ^^""^ ^^"^ in the case of Se"ncreaT Th. 7^"" T '^"^ '^' ^^^""^ at hearing the nel U Tforllt,/"' """^ "" *'"'"« ''^ ^" hi.v fnr ft. . ' . "^* '■^*®°" 3" excellent chance to tion l7,^''"^^P*«="'^ «■■' who basing his judgment on the o^ra! of the sttk """'"' '""*^*'''"' *^^"^^^ - '"— in the Se divlSd °Tr' *•' ^°°«°"««o« of the previous rate of pHes with the same conditions as aretid' din ft^rrt:™- THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 21 dividend. The two types of announcement have a common characteristic: they indicate good news to the investor and speculator. The continuation of the previous rate is different only in degree from the increase. Therefore, this kind of an- nouncement is discounted: (a) When the dividend announcing stock declines in price, the general level of stock prices remaining the same; or (b) when the dividend announcing stock declines in price, and the general level of stock prices rises; or (c) when the dividend announcing stock declines in price to a greater extent than the decline of the general stock price level; or (d) when the dividend announcing stock rises in price, but less than the rise in the general stock price level. (c) The Test of Effective Discounting It is futile, of course, to expect perfect discounting or over- discounting consistently. For reasons explained above, approxi- mate accuracy of discounting only is claimed. The diverse character of the stocks makes anything more than approximate accuracy impossible. Therefore, it is only fair to credit the stock market with discounting when the failure to discount is comparatively slight. The announcement may be said to be discounted in effect when such substantial accuracy is obtained. The conditions establishing the tests of effective discounting will be described in the following sections. Announcement of an increase in dividend. — The an- nouncement of an increase in dividend is discounted in effect: (a) When the dividend announcing stock increases in price only slightly more than the increase in the general level of stock prices; or {b) when the dividend announcing stock in- creases slightly in price, and the general level of stock prices remains the same, or (c) when the dividend announcing stock declines slightly less than the decline in the general level of stock prices. It is true then in all three conditions, "(a)," "(6)," "(c)," of this test, the stock market fails to some extent to discount. Nevertheless, if such deviation of the special stock from the '^ 22 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET general trend is relatively slight, the benefits of discounting are achieved. Just how large a margin of error should be permitted in the price behavior of a dividend announcing stock, and still consider the stock to show effective discounting, is a debatable point. Certainly if the dividend announcing stock shows dis- counting within }/^ or even 1 per cent of accuracy (that is, shows a failure to discount of not more than J/^ or 1 per cent)'^ to all intents and purposes discounting is demonstrated.'* Announcement of a decrease in dividend. — The announce- ment of a decrease in dividend is discounted in effect: (a) When the dividend announcing stock decreases in price only slightly more than the decline in the general level of stock prices; or (b) when the dividend announcing stock decreases slightly in price, and the general level of stock prices remains the same ; or (c) when the dividend announcing stock increases in price slightly less than the increase in the general level of stock prices. Again, discounting is not perfect nor is there overdiscounting. Apparently, the news of the "cut" in dividend causes a relative drop in price. In condition "(a)" not all of the decline in the particular stock is explained by the decline in the general level r the excess decline is chargeable to the announcement. Like- wise in conditions "(6)" and "(c)" the effect of the announce- ment is discerned. However, it would be unfair to charge the stock market with failure to discount when this variation is within the margins indicated above, for the reasons explained. Announcement of continuation of the previous rate of dividend. — The same conditions as apply to the increase in THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 23 "See p. 26 — (c) — ^for definition. The expressions: "One per cent of accuracy"; "2 per cent of accuracy"; "failure to discount by 1 per cent," etc., must not be interpreted, as later explained (pp. 27 et scij.) as an indication that the stock market is partially unsuccessful in discounting. As will be seen, it is fair to judge the market's capacity for discounting only in comparison with the magnitude and importance of the event discounted. For example, a "failure" of discounting of 2 per cent is really not a failure at all, if the dividend increase dis- counted amounts to 20, 50 or 100 per cent. The expressions as used are useful in this part of the study because of the necessity of making a classification of the results for purposes of analy- sis. This classification of results then is studied in the light of the events discounted. See pp. 34, 35. In succeeding pages it is of the greatest importance to remember the relative or com- parative nature of such "inaccuracy." »* This standard is checked later by another method, and found to be substantially sound .. See p. 37. the dividend rate apply to this class of announcements. For the details of these conditions, see page 21. Summary of results: The degree of discoimting effi- ciency of the stock market. — The analysis of the data and the results observed are presented in the following tables. It is important to remember that the price behavior of each of the 1000 stocks is analyzed separately. The resume which follows is simply a summary of the results obtained by application of the methods and tests of discounting discussed in the previous section. For the sake of affording a number of various angles from which to discuss the data and the results, the data are classified : (a) According to the general nature of the business of the corpbration making the announcement; that is, whether rails or industrials. (b) According to the state of general business conditions; that is, as to whether the announcement is made during de- pression or "boom"; improvement period, or period of decline. The general state of business may very well be a factor com- plicating the function of discounting, since it so radically affects the prices of the stocks affected. While it is true that the method of analysis described in the previous section is intended to eliminate the effect of the general market on the price of a particular stock, it may, nevertheless, be true that a particular dividend announcing stock follows the general trend more sym- pathetically in "boom" than in depression period, or vice versa, and thus the effectiveness of discounting may be affected. To calculate the effect of this influence, if any, the period under discussion, 1904-1922 inclusive, is divided into the various phases of the several business cycles comprised in this period. While a conventional division of the business cycle is into four phases — period of improvement; "boom"; decline, and de- pression — a glance at any chart representing an index of stock prices shows the practical difficulty of making a clean-cut divi- sion of a cycle into four such periods. ^^ Rather than draw an "See Babsonchart of American Business Conditions, Babson's Statistical Organization. Any issue. Also W. P. Hamilton, "The Stock Market Barometer." Charts in frontispiece. iW' THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 25 arbitrary line and attempt to indicate precisely where one of these phases ends and another begins, the sub-periods of im- provement and "boom" on the one hand, and the sub-periods of decline and depression on the other, whose limits are unmis- takable, are combined. The characteristics of the sub-periods so combined are sufficiently alike to permit the combination for the purposes of this study. That is, generally speaking, stock prices, as a whole, act the same during the sub-periods of improvement-" boom"; also during the sub-periods of decline- depression. One is a combined period generally of rising prices; the other generally of falling prices. One further question remains: Should the cycle under con- sideration be the cycle of general business conditions or the cycle of general stock prices? The cycles are not identical. Bank clearings of the United States are frequently used as an index of general business conditions. But if the data for bank clearings are plotted on a chart together with the average prices of representative stocks as an index of the stock-market cycle, the line representing the stock-market cycle would, with few exceptions, anticipate the general business line.*^ In other words, the stock market discounts not only specific events such as dividend announcements, but also general business conditions. Since it discounts general business conditions, it usually precedes, in its price changes, the changes in business it presages.' ' Obviously, then, the two cycles cannot be used interchangeably. Since the matter of a dividend announcement is entirely a phenomenon of the stock market, the announcing stock should be analyzed in the light of the stock-market cycle, not of the general business cycle. As an index of general stock prices the average daily index of the Wall Street Journal, referred to in previous pages, is the basis for the classification of the announc- ing stocks by cycle-periods. And since the price factors affecting railroad stocks are different than those influencing industrials, '•See Jair.es H, Brookmire. "Methods of Forecasting Based on Fundamental Statistics,'. American Economic Review, March, 1913, Vol.11, p. 57. "See Babsonchart of American Business Conditions, Babson's Statistical Organisation , Inc. Any issue. separate indices for each are used. Although the limits of the cycle-periods for the two classes are substantially the same, enough variations occur to make the use of the twofold index advisable. The limits of the cycle-periods so formed are as follows: Industrials. The cycle: January 1, 1904- November 15, 1907, inclusive: Period 1. Improvement-" boom"; Jan. 1, 1904 to Jan. 19, 1906, incl. Period 2. Decline-depression; Jan. 20, 1906 to Nov. 15, 1907, incl. The cycle: November 16, 1907-December 23, 1914, inclusive: Period 3. Improvement-" boom"; Nov. 16, 1907 to Nov. 19, 1909, incl. Period 4. Decline-depression; Nov. 20, 1909 to Dec. 23, 1914, incl. The cycle: November 24, 1914-December 18, 1917, inclusive: Period 5. Improvement-" boom"; Nov. 24, 1914 to Nov. 21, 1916, incl. Period 6. Decline-depression; Nov. 22, 1916 to Dec. 18, 1917, incl. The cycle: December 19, 1917-August 24, 1921, inclusive: Period 7. Improvement-" boom"; Dec. 19, 1917 to Nov. 3, 1919, incl. Period 8. Decline-depression; Nov. 4, 1919 to Aug. 24, 1921, incl. The cycle: August 25, 1921-December 31, 1922, inclusive (end of period — cycle not completed) : Period 9. Improvement- "boom"; Aug. 25, 1921 to Railroads. The cycle: Period 10. Period 11. January 1, 1904-November 20, 1907, inclusive: Improvement-" boom"; Jan. 1, 1904 to Jan. 22, 1906, incl. Decline-depression; Jan. 23, 1906 to Nov. 20, 1907, incl. The cycle: November 21, 1907-December 23, 1914, inclusive: Period 12. Improvement-" boom"; Nov. 21, 1907 to Dec. 30, 1909, incl. Period 13. Decline-depression; Dec. 31, 1909 to Dec. 23, 1914, incl. The cycle: December 24, 1914-December 18, 1917, inclusive: Period 14. Improvement-" boom"; Dec. 24, 1914 to Nov. 6, 1916, incl. Period 15. Decline-depression; Nov. 7, 1916 to Dec. 18, 1917, incl. The cycle: December 19, 1917-June 20, 1921, inclusive: Period 16. Improvement-" boom"; Dec. 19, 1917 to May 27, 1919, incl. Period 17. Decline-depression; May 28, 1919 to June 20, 1921, incl. 26 THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 27 The cycle: June 21, 1921-December 31, 1922, inclusive (end of period — cycle not completed) : Period 18. Improvement-" boom"; June 21, 1921 to Tables A, B, and C, which follow, summarize the results of the analysis of announcements of continuation of the same rate of dividend, of increase in the dividend, and of decrease in the dividend, respectively. The results are classified by frequencies — that is, the tables indicate the number of stocks showing dis- counting within K of 1 per cent accuracy; the number of stocks showing between H and J^ per cent accuracy; the number showing between J^ and 1 per cent accuracy, etc. By the expression "within 1 per cent accuracy" is meant that the stock showed one of the following results, any one of which establishes the fact that the announcement is discounted : (a) Perfect discounting. (b) Overdiscounting. (c) Failure of discounting so slight that the price of the dividend announcing stock did not vary more than 1 per cent from the general trend. In other words, the outside limit of inaccuracy of discounting is 1 per cent. Columns 1 to 6 then in their order from left to right represent a progressively decreasing capacity of the market to discount. The greater the proportion of the whole number of announce- ments appearing in the first three columns to the left, the more effective the discounting capacity indicated. Each of the columns is in turn divided to show the degree of discounting effectiveness both on the day of the announcement and for the two days combined (D.A. : day of announcement; B.D.: day of announcement and day after the announcement combined). Conclusions. — A study of the tables on pages 28-33, inclusive, leads to the following conclusions. (a) The stock market shows its greatest capacity for dis- counting, naturally, in the case of announcements of no change in the dividend rate (see Table A). Even in this class of an- nouncements, however, discounting is not perfectly shown, as is indicated by the fact that of the entire group of these announcements, there is discounting (for both days combined) in 82.8 per cent of the total, or 17.2 per cent less than a perfect showing (using 1 per cent of accuracy as the standard of effective discounting). Although this is a high percentage of cases in- dicating effective discounting, the fact that there is a comparative failure to discount in the case of 17.2 per cent of the total indi- cates that there exists an element of uncertainty even when the dividend rate is not changed.^* Announcements of increases of dividends rank second as regards the ability of the stock market to forecast. For the day of the announcement, the results show effective discounting in 68.3 per cent of the total number of cases; for the two days combined, effective discounting in 66.0 per cent of the total. It is true that the results are not as nearly perfect as for the announcements of no change. Two outstanding factors must be kept in mind at this point, in judging the discounting function of the market. First, the comparative strictness of the test or standard which defines effective discounting. This has been set at 1 per cent, a test which imposes rather narrow limits as a basis of measurement. A glance at the cumulative figures in Table B shows the effect of analyzing the same results by measur- ing the efficiency of discounting within 2 per cent of accuracy. Respectively, for the day of the announcement and for the two days combined the results become 83.0 per cent and 80.3 per cent. Second, and more important, these results are the more significant when the comparative failure of the market to dis- count is studied in the light of the extent of the increases in the dividend rates concerned. The failure of the market to dis- count accurately the announcements of dividend increase is shown to be relatively slight when compared with the amounts of the increases themselves. For example, in the following tabulation it is seen that although in 5.7 per cent of the total number of announcements of increase (both days combined), there is a failure to discount the announcements by 5 per cent or more (that is, there is 5 per cent or more inaccuracy of dis- counting), the fact that these announcements are of increases in dividend income as high as 200 per cent, makes the failure ••The relative nature of this"failure" must be kept in mind. See p. 22. footnote 13. <«*■''' O U CO u 1 Vi Z ^ m Pi H > m P •< rt •J O ■B 00 H 00 U ^m ^ f^ t* t f^ •o cs o> O »* «o t>> t« Ot o« * <0 •- O 00 li^ 00 00 «s t^ 'O ^0 r^ O* ©. 5>hS» ^g? « kO kO :f^- j: . g^fe?^ ts m ^' ' ' ' a 06 Z tt o >o o o o ^ o o «n ^ IT) ) t* 1/5 Tf> r~ r<5 ^ — (N (O a I/) cs »• (•) lO J'' 0^ C« W ^ (S ro O ^ IT) o o vc ^ o* *** s ... ^ ^ .4 r4 lo c 2 . . . . be JJ: : : : -. : o o • o • o o • o • 1* • ^ -H : \0 t^ M • -« o • 1// vO • O O ■ — • o o ■ OS i 00 o> >o *n O' t^ Oh. <0 r« 00 o> Oi 09 CO 00 ^^ ::r:«^ ^6?65 «s *o o - o o o o (/I o o o o «0 m O CM 00 (S CM O O >* CN '*«■* — lO r^ «/j O "-1 ^ O 00 00 a -' >o ■ 00 t>. ^ o >/> lO Tt" ^ — S O cs •* O W o u (z. w O 03 ^ u u (X, (X. 3 to CS O* cri O •-* o> s H > « {3 ^ to ^ U s o> R to U •O OO t* ^ Os »< •-< 0\ r». O* VO r* 00 ov ON 5> nP 6? 6? :r:s2: JZ , o vO s9 ^^5? CM tn a •o n » CM M • o o ui cs a ifl o ^^ \0 «D CM o — ro tN. CM o - CO r» ::?: t^ • o o c* t^ es « . O CM CO «^ O -H fO If c o t ^ ■<*" Tj« OT u H « PO «o c^ en K nj cs U CJ c5 S „ o t« . ■^ •- H 0, be s ti Ji O 00 vO 00 CM 00 « CM CM CM 00 VO t^ CO 9 o< 'C CM 00 ^ CN t^ f^ \r> V Ov VO r* 00 O a ^ 65 *« •«* •« « o • :?! •*^ ^M oa lo e S • « • • 4J « • « 1 • ** U « <■ • « 4! • * ■ • Q CM VO •H 00 >* o o «o o 00 00 o> ro V4 ^ r- Ov ^ VO 00 Ov •* c* »^ O lO v^ VO PO CM VO »-« OD o> «o CM 00 Ov ID CM 00 ^ VO fO VO PO ■>*• »^ t^ fO VO CO _^ 1 inn wn Gt o O u 4^ (U i*-! ^ o E 3 U en ■4-» c CO cS m u m rt u ca o u u H 0. o >> ca o cq 2 ** ffl u w 5 CM "S c 11 CQ 2ii C ~ o: Q 11 CQ H -w E o ^ c -o CM o o • 5 - cd a 0^ cfl E-^ a 2 ^ - CQ c4 «^ 2 "5 S 01 "O E < Q ^Q2 _ cs <-• . B C 01 c o u 8 CQ S o o •*-" c .2 c -" ti 14 <0 S n O a u u CQ td v u «« 0« m e r* ■ ' • • . • lO 9* ^* **> f) 9 lO « ^ m 00 «« 0» ^ t» Oi « i« « «o r» oi ^^ :jJ:f2: PhPlvO g?^g? r4 lo 8 C/l » t« »« e «o o »« « 00 m lo rt O O * M -M O O (O -« o «o « o »« n t«. o o o >.• >o o — 6 1^ >o r* i« o o t* ^ Wi* I ^ tti «H O (<)■/> «4 o a u td :s o O «S »< © «*» fs :s; M O fO «4 O 00 o o ^ — o 00 «4 «4 C4 <^ M 00 :?; o (O »*) fs r* « c< w« e*> lO r* O* » s O rt Z ><-• O 0) H (Li <0 r« 00 «o O ^ -* 00 moo s «o 65^ •^ fli^ «i4 5?^^ « lO j: . . . ^ (A g •< O «^ «o (d U o> o *4 O f) ro t* W) (>4 ^ lO «^ i-« ^ to O •* o o -< ^ O O to N •* lo (s \o 00 ^1 ^jl ^Jl ^* •^ V4 t^ ^4 m* w^ t»j f^ W4 Tf ^ V4 O Oi 0» Os € H o <^ o> o* •N ro •* M ^ O 00 00 o ^ O t* t^ lO O 1^ »>• lO 0) H a. (*< O eo O O lO Ok 00 r* Q O O to 00 O N «n o »^ o m 00 M •-> p O t* 00 Ov o • v4 >V I.K M (S lO ■•->**■■• s o o o ■ o o • o o o • o o • o O O •< • N t* O O O • «s N 00 t* O O O • N M 00 r* *4 M o • o «M 00 lo o o »* . -* M « tf> o «< o • o — * * o « o • o •- * w* ^ ^ ^ ■ o f^ fO (M 00 »o N • O (S O f*^ "S • <*J «i4 « 1 PQ 1^ c 1 *4 to 00 Total No. of cass Per. of total cases < »; u b w w u b (/3 z u (I. b QQ ■ r* «« W) '*• o 1 3 00 00* cs •* o • *4 M <0 00 a • W) O « ^ O t«. o o> ^ o fO ^ lO 00 O -< . . . ^^ : ^^ r^ *** : H > CO •*^ .*v w^ N lO (0 g J u 1 .c . . . . U i jg « « « «p S e« *4 o M o o o ■4 m is n 2 < m o < M ^ Q o o o o ® ■ • •c O • 1 • A ^ «-< N O ^ *4 a « < Q «*>•<»* o •o •O e> 1 « M «4 ^ O l« «4 . o v^ < a N f^ fO o 00 «*« n N O «S «-• «4 <* T ■ " V4 **i • < 00 fi ^ O) PO O d to v4 n O lO ^ o o 00 < lo a o a M *4 N to "ts "rt o •tJ o « h lO -« 00 eo O V> <0 <0 00 9. g? ^ •*V rl\ ^^ t^ tr. «4 to w •0 ^ ^ s fO 5 2 5 2 Ok e*S eO »H «S «n «o « 3 8 ea V (d C* \w (0 CO U ^ S ii s ?! o ^ Si w CN O ft (« St3 13 .O .2 S o rt S J3 If •^ OB Q il oi O CQ H «£8 O, O ^ s ..2 3 *•* ^3 ^^ V '<-> u ? £ C o « - 6 ;g c «s '. _ a» <^ 5 ^ s o 5 •-•eg - s .2 C .S (9 I t < u tfl d) u o o {X} f^ b) U 00 U 3 .« « « • • a M •**•••- •5 ■ «J ^: : : : •«■« Q • r* S « j3 ^ fi 3 "^ N CN ' 4 00 «^ esi «o fS «-» nm ^1 r^ >-» e«* N i« t' «s CVJ (N t^ '^ «n Ov CN t*i a «4 ^4 oa ^ t^ « 00 ^ «• (N <-« •^ •H «-l 10 l« lO « ^ «/5 1/5 •< vH «>iri >^ CN r.=! cases cases o2 • *j ^•s „ 4 (0) •^ rt< « •5 • M ** « • OQ • « • Q • • a • 0^ • W) • *< « ^ Is •< > n S 5- M 1 -> • 1 M . » «n • 1 en N| 1 -^ • i R n tn '. tti 1 «o ^ : I ^ • < • - • to • N 10 • 1 ■ • T. «i4 • M «> • ^ "O • < Q « • M 1 <0 ^ 1 " q 1 n M • 1 ^4 06 »H 1 • I 1 X • < • 9 s • «« • -« •* • 1 n e «« ' >4 ^' 1 • 1 < • Q 1 Q w^ n 1 CS g 1 :« • < • «•> • . " ^ S • • • OB 01 U «G : s a ^ & '. •» cd 4^ 1 : d2 ^ ^ Z'S ft< 1 ■a . .o X >^ 3 ^ n tn >• .? «* W »■ 1 W4 w4 - H 0< s e* 00*00 •o 10 o o o to ^ ^ «o s S M *n •o C 8 ® — C OB S a (kt^ > I o N m 2^ ft a 6 u o a % G U THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET to discount relatively unimportant. It is manifestly not a serious failure of discounting when the dividend rate is increased from 2 to 4 per cent (an increase in dividend income of 100 per cent), and the stock market fails to discount such an announce- ment even to the extent of 5 per cent. In many of the cases of an increase of dividend it is impossible to calculate mathe- matically the rate of increase of dividend income — when the initial dividend is paid on stock or a passed dividend is restored. This increase cannot be measured; therefore, the following tabu- lation is conservative in that it indicates only those ranges of increase that may be mathematically expressed. Table D COMPARATIVE TABLE— EFFECTIVENESS OF DISCOUNTING AND RANGES OF DIVIDEND INCREASE ACCURACY OF DISCOUNTING EFFECTIVENESS OF DISCOUNTING PER CENT RANGES OF INCREASE IN DIVIDEND INCOME PER CENT PER CENT WITHIN D.A. B.D. LOW HIGH ?^ of 1 55.3 6.3 6.7 14.7 13.3 3.7 47.3 5.7 13.0 14.3 14.0 5.7 3.6 16.6 6.6 20.0 20.0 25.0 240.0 100.0 200 150.0 250.0 200.0 H—u H— 1 1—2 2—5 5 and over'* Total 100.0 100 .... It will be noted that the absolute size of dividend increase apparently has no effect on the discounting function of the market. By far the greater number of cases falls within the first horizontal column (indicating the closest approach to perfect discounting). This column shows at the same time a higher amount of dividend increase than any other with one exception. It is just as easy to discount large increases as small — the nature of the stock and of the issuing corporation seems to have more weight than the nature of the announcement. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 35 In turn, announcements of decrease of dividend are discounted less effectively than are the other two classes discussed. For the day of the announcement and two days combined, respec- tively, the percentage of effectiveness of discounting (within 1 per cent of accuracy) is 47.0 and 46.0. Here also, it is proper to analyze the discounting function of the market in the light of the size of the dividend reductions involved. The following comparative table combines the elements desirable for a proper analysis. Table E COMPARATIVE TABLE-EFFECTIVENESS OF DISCOUNTING AND RANGES OF DIVIDEND DECREASE ACCURACY OF DISCOUNTING EFFECTIVENESS OF DISCOUNTING PER CENT RANGES OF DECREASE IN DIVIDEND INCOME PER CENT PER CENT WITHIN D.A. B.D. LOW HIGH U of 1 37.0 4.5 5.5 15.0 26.0 12.0 38.0 2.0 6.0 8.5 22.5 23.0 12.5 40.0 20.0 28.6 16.6 20.0 100 li — U 100 ys / i U— 1 100 /I ■*■ 1 2 100 2—5 100 5 and ovep» 100 Total 100.0 100.0 .... .... It will be noted that in Table E the greatest percentage of decrease in dividend income is 100 per cent in each class. This is because the "passing" or non-payment of a dividend repre- sents the greatest possible decline in dividend income, whether the former rate is 1, 2 or 5 per cent. The same general char- acteristics appear as in Table D. (6) Analyzing the discounting effectiveness of the stock market from the viewpoint of the kind of stock involved (rails or industrials) somewhat the better showing is made in the case of railroads. It will be seen from Table F below that while *»A separate analysis of each item in this group shows the same results as for the group as a whole, i. e., in every case, the percentage of deviation from perfect discounting is more than compensated by the amount of increase in dividend incomei »• A separate analysis of each item in this group shows the same results as for the group at a whole, ». «., in every case, the percentage of deviation from perfect discounting is more than compensated by the amount of decrease in dividend income. I M THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET industrials as a class are eflFectively discounted (both days com- bined) m 67.2 per cent of the total number of cases, railroads are discounted m 76.9 per cent of the total number of cases. Announcements of dividends by railroads make a consistently better showmg regardless of the nature of the announcement- contmuation of the former rate, increase or decrease. This is without doubt due to the fact that for the greater part of tne period of time under investigation (1904-1922) railroads as a group, constituted a higher type of investment security than industrials. Table F COMPARATIVE TABLE-EFFECTIVENESS OF DISCOUNTING (Within 1 Per Cent Accuracy) THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET 37 INDUSTRIALS RAILROADS CASES SHOWING DISCOUNT- ING WITHIN 1 PER CENT ACCURACY CASES SHOWING DISCOUNT- ING WITHIN 1 PER CENT ACCURACY NATURE OF ANNOUNCEMENT NUMBER PER CENT OF TOTAL NUMBER PER CENT OF TOTAL D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. A. Nochangein dividend. . . . B. Increase in dividend. . . . C. Decrease in dividend. . . . 225 167 66 221 160 67 82.7 68.1 44.0 81.2 65.3 44.6 204 38 28 193 3S 25 89.4 69.1 56.0 84.6 69.1 50.0 Total number cases showing Discounting within 1 per cent 1 458 448 68.6 67.2 270 256 81.1 76.9 (c) In analyzing the comparative efficiency of the stock market in discounting in periods of boom and improvement as contrasted with periods of decline and depression, there IS remarkably little difference between the two. At some points the former shows the best results; at some the latter. If any may be said to be superior, on the whole, the period of boom- improvement shows slightly the better results. This slight superiority, if it be allowed, is not difficult to understand in the case of announcements of no change and of increase in dividend. In the period of boom-improvement the natural buoyancy of the general market may well conceal relatively small failures to dis- count. The consolidated table below shows, however, that in the cases of decreases of dividend, the superiority of the dis- counting function is most marked. Such a result seems to point out that the professional speculator is not blinded to the virtues and defects of a particular stock by a general market condition of inflation and rising prices. *• Table G COMPARATIVE TABLE— EFFECTIVENESS OF DISCOUNTING (Within 1 Per Cent Accuracy) IMPROVEMENT-BOOM DECLINE-DEPRESSION CASES SHOWING DISCOUNT- ING WITHIN 1 PER CENT ACCURACY CASES SHOWING DISCOUNT- ING WITHIN 1 PER CENT ACCURACY NATURE OF ANNOUNCEMENT NUMBER PER CENT OF TOTAL NUMBER PER CENT OF TOTAL D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. A. Nochangein dividend .... B. Increase in dividend .... C. Decrease in dividend. . . . 316 73 40 313 65 38 83.8 57.5 54.0 83.0 51.2 51.3 113 116 54 101 116 54 91.8 67.0 42.8 82.1 67.0 42.8 Total number casesshowing discounting within 1 per cent 429 416 74.2 62.0 283 271 67.1 64.2 i\ ^ Supplementary Method of Determining Effectiveness of Discounting. — ^A check on the accuracy and essential sound- THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET ness of the method explained in the preceding pages is applied at this point. A moment's thought will show that another method of testing whether the stock market does or does not discount dividend announcements is applicable. One way of estimating approximately the ability of the market to discount is to study the course of the prices of the stock for some time after the time of the announcement. In the case of an announce- ment of increase of dividend, for illustration, the stock should reach its highest price at or about the time of the announcement itself. If the announcement has been fully expected, no further considerable rise should take place. If a considerable advance does take place after the news is made public, it is possibly an indication of the partial failure to discount. If no material change in price is shown after the announcement (considering the general market trend), discounting is possibly indicated. For example, a stock selling at 40 at the time of the announce- ment rises to 45 after the announcement (a price change con- trary to the general market). Such an advance possibly shows failure to discount. The words "possible" and "possibly" are used advisedly, because while this method of checking (which we may call Method 2 for estimating discounting effi- ciency) is useful in safeguarding against essential inaccuracies in our first and main method (Method 1) it has serious limita- tions. First, it provides no means of measuring the comparative success or failure of the stock market to discount. It simply states that the dividend is or is not discounted — no further comparison is possible. Further, it is unwise to lean too heavily upon Method 2 as a positive index of discounting, because, directly after the announcement of the current dividend is made, it must be kept in mind that the price changes of the stock are increasingly affected by the prospects for the next dividend. The increase in price of our stock might be completely due, not to the failure of the market to discount the current dividend, but to its anticipation of the effects of the coming dividend announcement. Likewise, in the case of announcement of a decrease, the price of the stock at about the time of the announcement should be at approximately its lowest and should not materially decline THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 39 thereafter. In the case of a dividend remaining the same, the same reasoning applies as to the increase in dividend. Using Method 2, not as a positive test of discountmg effective- ness, but as a supplementary check on Method 1, the results are highly interesting. Invariably, the results yielded by the use of Method 1 are corroborated by Method 2's results. That is to say, that adopting the test of 1 per cent accuracy as our standard of discounting, without exception the announcements shown to be discounted by Method 1 are shown also to be dis- counted by the second method. B. The Time of Discounting. Introduction— General method of analysis.— But in addi- tion to knowing the percentage of cases in which discounting is found, a still more important question arises. Just how far m advance of the event does the market register its forecast in the form of price quotations? This part of the study consists of an analysis of those stocks showing discounting as described in the previous section. Since in the cases of these stocks no considerable movement in the price of the stocks takes place at the time of the announcement, the change must have taken place some time previously. That is, if the market discount the continuation of the same rate of dividend on a stock, and no great movement in price takes place at the time of the an- nouncement, the accrued dividend must have been added before the time of the announcement. At some time previously, there is a variation upward from the market trend. This point indi- cates the time of discounting. Likewise, in the case of a dividend increase, this variation is upward from the general market. In the case of a decrease the opposite is true; a variation down- ward marks the time of discounting. The time of discounting has been localized by monthly periods. Using the same method of comparing the particular stock price with the general stock-price level as was used in ascertaining the efficiency of the market in discounting, the comparison of prices is carried backward from the time of the announcement. No arbitrary standard is set up as to the number of months withm which to limit the scope of this part of the study. The data 40 THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET themselves determine how far back the analysis is to go. The time of discounting is distinguished almost without exception by that space in time (monthly period) showing the greatest variation of the dividend announcing stock from the general market. However, in certain cases, where there is more than one such variation in the same direction of equal or nearly equal magnitude, the first is taken as showing the time of dis- counting. Even though the entire increase does not take place within one monthly period, the earlier increase is the first sign of discounting. Tables H, I, and J which follow, summarize the results of this analysis: Table H NUMBER OF MONTHS STOCK MARKET INDICATES ANNOUNCEMENTS IN ADVANCE IMP.-BOOM 1 NO CHANGE IN r RATE INDUSTRIALS • a 2 3 11 17 6 5 39 26.7 4 4 5 1 3 5 3 a • 1 1 6 • • • • • ■ • • 7 • • « « • • • • • • 8 9 10 Total 1 3 5 7 9 11 11 4 11 37 25.3 17 18 4 13 52 35.6 • • • • • • • • • • • ■ • • • • 46 51 16 33 Number Total of %. . 13 9.0 5 3.4 • • • • 146 100.0 DECLINE- DEPRESSION ] so CHANGE IN RATE INDUSTRULS 2 4 6 8 24 3 21 12 2 6 6 8.7 1 1 1.5 « • • • • • • • • ■ • ■ • • • • • • • • 64 5 Number Total of % . . 27 21 39.130.4 14 20.3 69 100.0 THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET 41 TABLE n— Continued IMP.-BOOM NO CHANGE IN RATE RAILS 20 16 1 4 41 25.9 23 20 4 3 50 31.4 1 7 1 4 13 9.1 2 1 1 1 5 3.2 • • • • • ■ ■ • a a • • a • a ■ 10 12 14 16 18 24 15 4 7 70 59 11 19 • • Number Total of % . . 50 31.4 159 100.0 DECLINE- DEPRESSION NO CHANGE IN RATE 4 RAILS 11 13 15 17 7 2 9 3 1 13 45.0 127 31.5 4 1 5 17.2 108 26.8 1 1 3.4 33 8.2 1 1 3.4 12 3.0 a a • a • * a a • a • « 22 4 3 Number Total of % . . 9 31.0 29 100.0 SUMMARY Total number Total of % . . 123 30.5 403 100.0 Table I NUMBER OF MONTHS STOCK MARKET INDICATES ANNOUNCEMENTS IN ADVANCE 1 t.:-' IMP.-BOOM 3 1 INCREASE IN RATE INDUSTRIALS 1 2 1 4 1 1 7 8 • • 9 a • 10 Sub-Period . . 5 6 1 Total 1 ^ 4 3 1 • • , , ■^ 1 5 7 10 3 6 6 2 1 • • a a ,135 7 4 2 1 4 4 1 a • 1 1 -.. 18 9 1 12 a • 14 1 6 1 12 1 11 • a 4 • • 1 a • 1 • ■ 1 r^ 4 Number • a 62 Total of % . . 19.422.6 9.7 19.4 17.71 6.4 1.61 1.6 1.6' .. 100.0 ^ THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET TABLE I — Continued DECLINE- DEPRESSION INCREASE ! IN ] flATE INDUSTRIALS 2 4 6 8 6 3 4 3 2 2 10 • ■ 14 15.4 1 2 3 19 4 10 8 31 8.834.1 1 3 5 3 12 13.1 1 2 3 • • 6 6.6 • • • • 1 1 2 2.2 • • • • 2 2 2.2 • • • • • • • • • • • • • • • • • • 11 12 45 23 16 17.6 Number Total of %.. 91 100.0 IMP. -BOOM INCREASE IN RATE RAILS 10 12 14 16 18 2 1 • • 1 4 26.7 1 • • 2 1 1 • ■ • • • « 2 • • • • • • 1 1 • • 2 13.3 1 • ■ • • • • • • • • 1 • • • • • ■ • • • m • ■ • • • • • ■ • • 5 5 2 3 Number Total of %.. 3 20.0 2 13.3 2 13.3 1 6.7 1 6.7 • • • • 15 100.0 DECLINE- DEPRESSION INCREASE IN RATE RAILS 11 • • 4 1 5 27.8 37 20.0 • • 1 1 • * 3 1 1 2 1 4 22.2 49 26.3 • • 2 • • 2 11.1 27 14.5 1 2 13 12 15 17 • • 1 5.6 12 6.5 • • • » • • • • 4 Number 2 11.1 33 17.7 4 22.2 20 10.8 18 Total of % . . • • • • « • • • 100.0 SUMMARY 4 2.1 Total number Total of %. . 3 1.5 1 0.5 .. 186 100.0 Table J NUMBER OF MONTHS STOCK MARKET INDICATES ANNOUNCEMENTS IN ADVANCE IMP.-BOOM decrease IN RATE INDUSTRIALS Sub-Period . . 1 2 i 2 3 20 3 i 1 • • 2 13 .^ 4 1 1 2 4 76.7 5 2 • • 1 3 ?0 6 i" • • 1 6 7 7 8 9 ■ • 10 Total 2 • • • • 2 13.3 1 3 5 7 9 a • 1 8 3 3 Total number Total of % . . 15 100 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 41 TABLE J— Continued DECLINE- DEPRESSION DECREASE IN RATE INDUSTRIALS 2 4 6 8 i 7 • • 1 2 3 7.3 • • 2 2 4.9 1 1 4 6 14.6 • ■ 1 7 8 19.5 • • 4 4 9.8 • • 1 4 5 12.2 • • 2 2 4.9 • » 3 3 7.3 • • • • • a 1 5 35 Total number Total of % . . 8 19.5 • • 41 100.0 IMP.-BOOM DECREASE IN RATE RAILS 10 12 14 16 18 • • • • 1 • • • • • • 2 ■ « 1 2 5 45.4 » • • • 1 1 2 18.2 ■ a 1 a • • • 1 9.1 • • 1 • • • • • • 1 9.1 i' • • • « 1 9.1 • • • • • • • • • « • a 2 3 1 1 4 Total number Total of % . . 1 9.1 • ■ 11 100.0 DECLINE- DEPRESSION DECREASE IN RATE a • a • • • • ■ RAILS 11 13 15 17 1 1 1 2 40.0 8 11.1 • a • a a ■ • • 12 16.7 2 2 40.0 8 11.1 • ■ 6 8.3 • » • • 4 1 Total number Total of % . . 1 20.0 a • 9 12.5 12 16.7 • . 5 100.0 SUMMARY 2 2.8 3 4.1 Total number Total of % . . 12 16.7 72 100.0 Analysis of results: Time of discounting.— (a) Com- paring the results shown in Tables H, I, and J for the three classes of announcements, the stock market gives the greatest amount of advance notice of the coming of the announcement in the class of dividend decreases. The summaries of the three tables mentioned may be analyzed from several points of view. It is seen, for example, that in the class of no change in dividend, in 88.8 per cent of the cases three months advance notice or 44 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET less is given; in the class of increase in dividend, in 48.6 per cent of the cases three months advance notice or less is given; in the class of decrease in dividend, in 40.3 per cent of the cases three months advance notice or less is given. Conversely, for the three classes, the following percentages represent the pro- portion of the cases in which over three months advance notice of the announcement is given: No change, 11.2 per cent; in- crease, 51.4 per cent; decrease, 59.7 per cent. Or, stated in another way, in the class of no change in dividend, evidences of discounting are most numerous in the column representing two months advance notice, with the column representing one month's notice a close second. In the class of increase in divi- dend, most of the announcements are discounted in the fourth month previous; in the classes of decrease in dividend, advance notice is shown equally in the first, the fourth and the fifth month previous. The average amount of notice, arrived at by weighting each of the monthly classes by the frequencies (items) in that class, for the three classes is: No change in dividend 2.2 months Increase in dividend 3.3 months Decrease in dividend 4.1 months (It must be kept in mind, however, that the foregoing state- ments refer only to the advance notice given when a dividend is discounted. It has no reference to the proportionate number of cases of discounting shown by the three classes of announce- ments discussed in Section A, this chapter.) For example, the class of decreases in dividend is discounted least effectively — in those cases of decrease which are discounted, a greater amount of advance notice is given than for the other two classes. The outstanding difference is between the class of no change on the one hand, and the two classes comprising changes in dividend on the other. The reasons accounting for this differ- ence can be adduced from the characteristics of stock-market news and the stock market itself. The news that a dividend is to be paid on stock which has paid no dividends for some time, or that the former rate will be increased, usually circulates in the market months before the actual announcement ma- i THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 4S terializes. Rumors of the restoration of the Pennsylvania dividend to 6 per cent in 1922 were heard approximately four months or more prior to the meeting of the directors at which the action was taken. The information regarding the position of the company and the ability of the directors to increase the dividend was from fairly reliable sources. Any speculator knew that the probabilities were all in favor of restoring the dividend some time in the future. As to the exact dividend date on which the new rate would be declared, there could not be the same certainty. But fundamental conditions favored a higher rate on the stock, and it was not strange that the market anticipated the announcement several months in advance. The speculator cannot know exactly when a change will take place; he can simply indicate in stock prices his belief that the change is coming sometime in the future. The earlier he acts, that is, the farther ahead he discounts, the more profits he will make. On the other hand, it is observed that certain widely held regular dividend paying stocks often pick up their next dividend a short time after the last dividend. Discounting is more likely to be exer- cised between dividend periods with regular dividend paying stocks, because there is always present an element of chance — a possibility that the next dividend will be reduced. As the dividend period nears its close, and news concerning the par- ticular corporation becomes known (interviews with directors, quarterly reports of earnings, etc.), discounting becomes opera- tive. The director of one corporation will have no hesitation in predicting that the corporation's stock (which has not paid dividends for some time) will have the dividend restored some time in the future; the director of another corporation whose stock has been paying dividends will be reluctant to state that the next dividend, or that the dividends for the next two or three periods will be paid. It is not that the non-dividend payer is in better financial condition than the dividend payer; it is because in the case of the non-dividend payer the time is ob- viously ripe for such action; in the case of the dividend payer it would be foolhardy to venture a prediction that dividends will continue to be paid indefinitely, simply because the cor- poration has a good standing. Carried to its logical conclusion, 4 m THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET this would mean that dividends on standard stocks as United States Steel, American Car & Foundry, etc., are discounted years m advance. Dividends on dividend paying stocks must and do depend on current developments, for the very reason that they have come to be considered as standard investment stocks— the conservative policy of their executive officers. For example, take the case of extra dividends. Financial reporters for newspapers and editorials appearing in financial news bulletms, speculate frequently, and at length, on the probabilities of the payment of an extra cash dividend out of the large cash reserves a particular corporation is piling up. The speculator has his mind made up concerning the payment of such a dividend-and because of the information to which he has access, he knows this ahead of the public. Just when the directors of the corporation will decide to make the extra cash disbursement is a matter of conjecture; knowing the con- dition of the corporation, general business conditions, and the policy m the past of this corporation, the forecast that some time this payment will be made is a fairiy safe one. The conditions favoring such a disbursement are by their nature of long stand- mg. It takes a period of months and even years to pile up a large cash surplus. On the other hand, continuation of the regular dividend depends largely on current conditions. {b) Continuing the analysis of the results of the three tables from the standpoint of the kind of stock involved. Table K which follows below, shows that the greatest amount of advance notice of a dividend announcement is given for industrials. This may be gathered by a glance at the distribution of the items in the columns representing the number of months advance notice given. The half of the table showing the distribution for industrials presents the items spread over each of nine months; that showing the distribution for railroads, over seven months. Three months advance notice or less is given for industrials in 66.2 per cent of the total; for railroads, in 83.3 per cent of the total. Stated conversely, this means that industrials give over three months advance notice in ZZ.2> per cent of the cases, while railroads give over three months notice in only 16.7 per cent of the cases. The average amount of notice given by industrials, 2.9 months; by railroads, 2.4 months. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 4T Table K COMPARATIVE TABLE— NUMBER OF MONTHS THE STOCK MARKET DISCOUNTS IN ADVANCE INDUSTRIALS NATURE OF ANNOUNCEMENT 1 2 3 4 19 43 10 72 17.0 5 6 23 11 40 9.4 6 • • 10 5 15 ' 3.5 7 3 5 8 1.8 8 3 2 5 1.1 9 1 3 4 1.0 TOTAL A. No change in dividend B. I ncrease in dividend C. Decrease in dividend 64 28 10 73 28 6 53 14 4 215 153 56 Total Per cent 102 24.1 107 25.3 71 16.8 424 100.0 RAILROADS NATURE OF ANNOUNCEMENT 6 4 1 11 4.6 A. No change in dividend ...... B. Increase in dividend ...... C. Decrease in dividend 59 9 3 54 5 2 55 6 5 14 6 2 22 9.2 2 3 5 2.1 . • 1 1 2 0.8 188 33 17 Total Per cent 71 30.0 61 25.6 66 27.7 238 100.0 (c) Table L shows the extent to which the nature of general business conditions at the time of the announcement (improve- ment-boom or decline-depression) affects the amount of advance notice of a dividend given by the market. In periods of im- provement-boom, three months advance notice or less is given in 79.2 per cent of the cases— in periods of decline-depression, three months notice or less is given in 61.0 per cent of the cases. This means that in periods of improvement-boom over three months notice is given in 20.8 per cent of the cases, or about one-fifth of the total. In periods of decline-depression, the same notice is given in 39.0 per cent of the cases, or almost two-fifths of the total. The average amount of notice: Improvement- boom, 2.5 months; decline-depression, 3.0 months. 1 H « THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET Table L COMPARATIVE TABLE— NUMBER OF MONTHS THE STOCK MARKET DISCOUNTS IN ADVANCE IMPROVEMENT-BOOM NATURE OF ANNOUNCEMENT 1 2 3 4 26 14 6 46 11.3 5 10 13 4 6 • • 5 2 7 8 9 • • 1 • • TOTAL A. No change in dividend B. Increase in dividend C. Decrease in dividend 87 16 3 93 17 3 89 8 7 • ■ 2 1 3 0.7 ■ • 1 • • 305 77 26 Total Per cent 106 26.0 113 27.7 104 25.5 27 6.7 7 1.7 1 0.2 1 0.2 408 100.0 DECLINE-DEPRESSION NATURE OF ANNOUNCEMENT A. No change in dividend B. Increase in dividend C. Decrease in dividend 36 21 10 34 16 5 19 12 2 7 35 6 48 18.9 2 14 8 24 9.4 7 6 13 5.1 2 5 7 2.8 2 2 4 1.6 • • 3 3 1.2 98 109 47 Total Per cent 67 26.3 55 21.7 33 13.0 254 100.0 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 49 I Chapter III THE DISCOUNTING OF STOCK DIVIDENDS AND PRIVILEGED SUBSCRIPTIONS A. The Degree of Discounting Efficiency. Introductory: General method of analysis.— In order to make an examination into the capacity of the stock market to discount stock dividends and privileged subscriptions, or *'rights," the same general methods are followed as in the case of cash dividends. Again, as described in the first part of this study, the announcements are taken from a daily news bulletin service.' From this source have been secured announcements of 140 stock dividends and "rights," covering the same period of time as the investigation of cash dividends, 1904-1922. Announcements of this type are not nearly as numerous as those of cash dividends and because of their nature, appear only sporadically, principally during periods of business prosperity. However, when they are made, they are of importance to in- vestor and speculator, and have been included as part of the subject matter of this study. The stocks represented by these announcements are (or were) listed on the following exchanges: New York Stock Exchange, 64; New York Curb Market, 19; Boston Stock Exchange, 6; Chicago Stock Exchange, 4; Baltimore Stock Exchange, 2; Philadelphia Stock Exchange, 2; Pittsburgh Stock Exchange, 1.* The prices for the stocks concerned are taken from the Wall Street Journal and the Commercial and Financial Chrofiicle. As in the former investigation, the price behavior of each stock is analyzed separately, compared with the price trend of similar stocks. The same tests of discounting are used; and Method 2, the system of checking the results of Method 1 is used to check the results shown by Method 1 as explained previously. • p^ Summary of results: The degree of discountmg effi- ciency of the stock market. — The results of the investigation are summarized in the same manner as the results^ for^cash dividends. Table M represents these results: 1 » Philadelphia News Bureau. » See Appendix C for list of stocks in which "rights" or stock dividends were declared. a o (0 H u o I u U CO U u u S 8 S B lO (^ e »> « lo «0 to lO M »> •O O « to 00 « M to ^ M • • • • a ^ OP V> « 00 *0 to « »« Ov •» »»» t»» #0 o •n »»» 00 •« lO lO s o •8 *«^ •^^ «4 <«| W) e c e 222 e a 22 •« f*> l« o (« « O «4 :$$ •O r« Ov ^gggg O O O O 00 «o O O O O «4 00 ^ j»>9 •^ f^ «4 Ct •/> a e o e a 22222 *i ** ** ♦* •** e in Ht M o • • • • • O M i« r«> e •O « 00 00 o v* w) lo O O « « CM lO « >o « r^ 8 O •« «4 00 e o o (^ w) r«. «s M U - S o « O O «-i M o> 00 «»» o o e «4 «n a o o 6S6S o o a •*»^ »*\ «i* M lO a a e s e ••S "^ "** ••^ •^ ^ .C X J3 2 «> «J «J «> «J ••• ••« •*• ••^ ••* o o o •« o ^ W> 00 »0 «M O M »« O O O O «4 >o « o :r :s: O O V* «4 «4 lO «n Mi *4 o o o «> o o -• o lO N O M IT) o o o « « o »* •«> '^ l*J Ot •g CO i M 1^ lO to Ok M »»5 M 00 «n lO o ^ a 9 CS " a o «« *« ^ o o o o o e O <*4 « i/5 o o o o o o o *o n -v ft *4 ^ to o -« o t*> lO 00 ^ o o M W p« tti a Si CO « « 00 a Si " a o S HflU 8 n i a e M « « 9 C3 O V 4 52 TEE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET (a) The announcements of "rights" and stock dividends are effectively discounted (within 1 per cent accuracy) in slightly less than two-thirds of the total number of cases. On the day of the announcement the results show discounting in 62.9 per cent of the cases; for both days combined, in 63.6 per cent of the cases.3 If the results are analyzed with 2 per cent accuracy as the standard, the announcements are discounted in approxi- mately three-quarters of the cases— 75.7 per cent on the day of the announcement, 73.6 per cent for the two days combined. As in the case of cash dividends, this investigation of the dis- counting efficiency of the stock market is fair only when the relative failure of the market to discount in the remaining one- third of the cases (using 1 per cent accuracy as the test) is com- pared with the amounts of stock increase involved in the an- nouncements. While the recipient of the stock dividend or "right" at the moment possesses no greater share in the property of the corporation than he did before the distribution, he does have a right to future dividends on the new stock if earned. This right to future earnings is in many cases very valuable, and none the less so because it constitutes a right to future, not present earnings. If the announcement is that a 100 per cent stock dividend is to be disbursed, and if the corporation has been capitalized conservatively and has been showing a large excess of earnings over dividend requirements, the an- nouncement may mean that the same cash dividend rate will be maintained in the future on double the number of shares of stock. The announcement potentially indicates a doubling of dividend income to the stockholder. If the stock market fails to discount such an announcement within 1 per cent accuracy, such failure of discounting is slight compared to the size of the increase of potential dividend income. Table N, which follows, indicates the ranges of increase in stock ownership compared with the figures showing the relative effectiveness of discounting by the market. > The results of this part of the investigation are approximately the same as those of Mean whose work is referred to in Part I of this study. Mears' conclusions are that discounting is shown in 60.0 per cent of his total number of cases, 91 . If to the 60 per cent are added those cases in which the changes (increases) in price after the announcement were "unimportant" (expression is that of Mears), the percentage of cases showing discounting is 71.0. These results agree substantially with those given above. the discounting of dividends by the stock market u Table N COMPARATIVE TABLE— EFFECTIVENESS OF DISCOUNTING AND RANGES OF STOCK OWNERSHIP INCREASE EFFECTIVENESS OF DISCOUNTING RANGES OF STOCK INCREASE accuracy of discounting (per cent) WITHIN D.A. B.D. NUMBER PER CENT NUMBER PER CENT LOW HIGH H of 1 75 2 11 18 27 7 53.6 1.4 7.9 12.8 19.3 5.0 79 2 8 14 22 15 56.5 1.4 5.7 10.0 15.7 10.7 1.5 2.0 20.0 2.0 6.0 2.5 900.0 /ij "^ •» u Yi 100.0 }A 1 75.0 1 2 300.0 2—5 400.0 5 and over* 138.0 Total 140 100.0 140 100.0 It will be seen that, as in the case of cash dividend announce- ments, the size of the increase in stock ownership bears no apparent relationship to the relative ability of the market to forecast. At the same time, it is apparent that the failure of the market to discount by 5 per cent or more in 10.7 per cent of the cases is relatively slight, as the increases in stock owner- ship announced are as high as 138 per cent. (&) Table O presents the results analyzed from the viewpoint of the class of stock — industrials or railroads. Railroads make considerably the better showing whether the results for the day of the announcement or for both days combined be taken. There is little doubt that this is because railroads were con- sidered superior as investment securities during the early part of the period covered by this investigation, added to the fact that railroad accounting has been standardized, making in- formation relative to railroads more accessible to the public 4 A separate analysis of each item in this group shows that in all but three cases, the per- centage of deviation from perfect discounting is more than compensated by the amount of increase in stock ownership. These three cases are all stocks with a very narrow market, and are inactive. 4 U THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET than that pertaining to industrials. During the latter part o this period announcements of rights and stock dividends by railroads have been exceedingly rare. This explains the rela- tive scarcity of railroad items compared with industrials. The recent plethora of stock dividends (1920-1922) has been dis- bursed almost exclusively by industrial corporations. Table O COMPARATIVE TABLE—EFFECTIVENESS OF DISCOUNTING (Within 1 Per Cent Accuracy) CASES < INDUSTRIALS (115) RAILROADS (25) SHOWING DISCOUNTING CASES SHOWING DISCOUNTING NUM BER PER CENT NUMBER PER CENT D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 70 71 61.7 62.6 18 18 72.0 72.0 (c) Table P presents the results classified according to whether the announcement occurred in improvement-boom or decline- depression. As with cash dividends, the stock market fore- casts most accurately during the period of improvement-boom. The differences shown between the two periods, however, are not great. The market can be relied on to forecast approximately two-thirds of the time. Table P COMPARATIVE TABLE— EFFECTIVENESS OF DISCOUNTING (Within 1 Per Cent Accuracy) IMPROVEMEJ IT-BOOM (63) DECLINE-DEPRESSION (77) NUMBER PER CENT NUMBER PER CENT D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 41 43 65.1 68.2 47 46 61.0 60.0 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 55 B. The Time of Discounting. Summary of results. — (a) Advance notice of announce- ments of stock dividends and rights is given as far as nine months ahead. It will be seen in Table Q, which follows, that such ample notice is given not only in a few cases, but in 14.5 per cent of the total, or about one-seventh of the time. The dis- tribution of the items is spread quite evenly over the entire nine columns representing advance notice of from one to nine months. In 70.4 per cent of the total, more than three months advance notice is given by the stock market — in only 29.6 per cent of the total is advance notice of three months or less given. The average amount of notice, computed by weighting each of the months by the frequencies of that month, is 4.9 months, or practically five months. Table Q NUMBER OF MONTHS STOCK MARKET INDICATES ANNOUNCEMENTS IN ADVANCE niP.-BOOM INDUSTRIAL Sub-Period .... 1 2 2 ■ • i' 3 6 17.2 3 • ■ 1 1 • • 7 9 25.7 4 1 • • 1 1 4 7 20.0 5 ■ • • • 2 2 5.7 6 « ■ 1 1 2 4 11.4 7 • • • • 1 • • 1 2 5.7 8 • • • • 2 2 5.7 9 TOTAL 1 3 5 9 • • • • 1 • • • • i 1 • ■ > • 3 3 6 2 21 Number Per cent 1 2.9 2 5.7 35 100.0 IMP.-BOOM RAILROADS 10 12 14 16 • * 1 • • • • • • • • 2 2 28.6 2 • • 2 28.6 • • 1 1 14.3 • • • ■ • • • ■ • • 1 3 4 Number Per cent 1 14.3 1 14.3 7 100.1 » I 4 56 THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET TABLE Qr-Continued DEC.-DEP. INDUSTRIALS 2 • • 1 • • • • 1 4 • • 1 • ■ 1 1 • • 3 6 6 • • , , • • 1 1 1 3 8 3 3 1 3 2 2 3 5 4 4 6 1 1 2 2 5 8 25 Number 5 35 Per cent 8.5 8.5 5.7 14.3 14.3 17.2 2.9 5.7 22.9 100.0 DEC.-DEP. 1 • • 1 9.1 10 11.4 RAILROADS 11 13 15 17 • • 9 10.3 i 1 9.1 12 13.6 • • • • • • 14 16.0 2 2 4 36.4 2 1 3 27.3 • • 4 4.6 2 7 4 Number Per cent 2 18.1 11 100.0 ALL AN- NOUNCEMENTS 15 17.1 6 6.8 Number Per cent 5 5.7 13 4.51 88 100.0 (h) Table R, classifying the results according to industrials and railroads, indicates that the announcements by railroads are forecast farthest ahead. More than three months advance notice is given in 89.0 per cent of the total— three months or less in only 11.0 per cent of the total. Industrials are discounted by more than three months in 65.7 per cent of the total — three months or less in 34.3 per cent of the total. The average notice, calculated as explained above, is 4.9 months for industrials; for railroads, 5.8 months. Table R COMPARATIVE TABLE— NUMBER OF MONTHS STOCK MARKET INDICATES ANNOUNCEMENTS IN ADVANCE INDUSTRIALS 1 2 9 12.9 3 11 15.7 4 12 17.2 5 7 10.0 6 10 14.3 7 3 4.2 8 4 5.7 9 TOTAL Number Per cent 4 5.7 10 14.3 70 100.0 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 57 TABLE R— Continued RAILROAD B Number Per cent 1 5.5 • • 12 3 5 3 5.511.1 16.727.816.7 • • 3 16.7 18 100.0 4 (c) Announcements are discounted farthest ahead in periods of decline-depression. Table S below shows the following com- parative results: Over three months advance notice for periods of improvement-boom, 59.5 per cent of the total; for periods of decline-depression, 80.5 per cent of the total. The average amount of notice: Improvement-boom, 4.4 months; decline- depression, 5.7 months. Table S COMPARATIVE TABLE— NUMBER OF MONTHS STOCK MARKET INDICATES ANNOUNCEMENTS IN ADVANCE improvement-boom 1 2 6 14.3 3 9 21.4 4 9 21.4 5 4 9.5 6 5 11.9 7 2 4.8 8 2 4.8 9 total Number Per cent 2 4.8 3 7.1 42 100.0 DECLINE-DEPRESSION ■ Number Per cent 3 6.5 3 6.5 3 5 6 10 6.510.913.121.8 4 8.6 2 10 4.321.8 46 100.0 St THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET Chapter IV RESUME At this point a resum^ of the conclusions arrived at in this study is fitting, as the results of the analysis of the data are scattered throughout the preceding pages; and since the data for cash dividends, and that for stock dividends and rights have been analyzed in the same manner, it is of interest to com- pare the respective results. The following summaries serve two purposes: First, they indicate similarities and differences between the results for the two sets of data, and second, they emphasize the remarkable degree of accuracy of discounting shown by the stock market. CASH DIVIDENDS STOCK DIVIDENDS AND RIGHTS EFFECTIVENESS OF DISCOUNTING (Both days combined: Accuracy, 1%) PER CENT PER CENT No change in rate 82.8 66.0 46.0 67.2 76.9 62.0 64.2 Increase in rate 63 6 Ded'ease in rate All industrials 62 6 All railroads 72 All stocks: Improvement-boom All stocks: Decline-depression 68.2 60.0 CASH DIVIDENDS STOCK DIVIDENDS AND RIGHTS EFFECTIVENESS OF DISCOUNTING (Both days combined: Accuracy, 2%) PER CENT PER CENT No change in rate 92.4 80.3 54.5 79.6 87.4 84.8 74.1 Increase in rate 73 6 Decrease in rate All industrials 70 4 All railroads 88 All stocks: Improvement-boom All stocks: Decline-depression 74.6 78.0 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 59 In comparing the results indicated above, the strictness of the standard to determine accuracy of discounting must never be lost sight of. Even a standard of 2 per cent accuracy {i. e., considering as not discounted all dividend announcements of stocks whose prices varied over 2 per cent from the general market) cannot be considered other than a stringent test. Yet a glance at the summary for cash dividends (2 per cent accuracy) above shows that for 8 out of every 10 announcements of indus- trials, and for almost 9 out of every 10 rails, discounting is an absolute fact. The results for rights and stock dividends are almost identical; the proportions being respectively, 7 out of 10. and nearly 9 out of 10. This does not mean to say that in the case of cash dividends on industrials, for example, that the market fails to discount the announcement even in the remaining 2 cases out of 10. Neither in the case of cash dividends on rails, does the market fail in the remaining 1 case out of 10. Only in an absolute and arbitrary sense, can it be said that the remain- ing cases show failure to discount. Relatively (that is, judged by the amounts of the percentage of dividend increase or de- crease indicated by the announcements), it has been shown, that with comparatively few exceptions, every announcement has been discounted. And from the viewpoint of investor and speculator, the only fair test of the stock market's ability to •discount is the relative, not the absolute test. CASH DIVIDENDS STOCK DIVIDENDS AND RIGHTS APPROXIMATE AMOUNT OF ADVANCE NOTICE MONTHS MONTHS No chance in rate 2.2 3.3 4.1 2.9 2.4 2,5 3.0 Inrrpa^e in rate 4.9 Dprrpase in rate All industria.ls 4.9 All ra.ilroa.ds 5.8 All stocks: Improvement-boom All stocks: Decline-depression 4.4 5.7 tfi THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET The striking characteristic of the foregoing table is the appre- ciably greater amount of notice given in the case of announce- ments of rights and stock dividends. This is due to their much more spectacular nature and the wide publicity attendant on their announcement and issue. But valuable as is the advance notice given in the case of rights and stock dividends, such announcements are comparatively rare; and by far the greater service is rendered by the stock in discounting announcements of cash dividends. It is truly remarkable that over a period of nineteen years, and including common stocks of every variety, the average amount of advance notice given by the market for this class of announcements is almost three months for all industrials, and almost two and a half months for all railroads. If the organized stock market were capable of exercising no other function save that of discounting, its record of performance of this single function would be more than ample to justify its existence and to entitle it to high rank as a useful business institution. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 61 Appendix A STOCKS ANNOUNCING CASH DIVIDENDS (Chapter II) (Listed on New York Stock Exchange unless indicated otherwise) Rails Atchison, T., & S. Fc Atlantic C. Line Industrials A Adams Express Advance Rumely Ajax Rubber Allied Chemical Allis Chalmers Amal. Copper Amer. Ag. Chem. Amer. Beet Sugar Amer. Brake Shoe & Foundry Amer. Car & Foundry Amer. Cotton Oil American Express Amer. Gas & Elec. (Curb) Amer. Ice Amer. Int. Corp. Amer. Light & Traction (Curb) Amer. Linseed Amer. Loco. Amer. Ship. Amer. Sm. & Ref. Amer. Snuff Amer. Steel Foundry Amer. Sugar Amer. Sumatra Tob. Amer. Tel. & Tel. Amer. Tobacco Amer. Woolen Amer. Zinc, L., & S. Anaconda Copper Atlantic G. & W. I. B B. &0. Boston & Me. (Bo.) B Bethlehem Steel Butte & Superior Canadian Pacific Canada Southern C, C, C, & St. Louis Central of N. J. Chesapeake & Ohio Chicago, B., & Q. Chic, M. & St. Paul Chic. & Northwestern Col. & So. California Pet. Calumet & Arizona (Curb) Calumet & Hecla (Bo.) Cambria Steel (Phila.) Central Leather Cerro de Pasco Sugar Chandler Motor Chino Copper Cluett Peabody Coca Cola Colorado Fuel & Iron I 62 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET Rails D D., L. & W. D. &H. £ F H Hocking Valley I Illinois Central Interboro J K L. &N. Lehigh Valley (Phila.) Industrials Columbia Graph. Columbus Gas & Elec. Cons. Gas Cont. Can. Copper Range (Bo.) Corn Prod. Crucible Steel Cuba Cane Sugar Diamond Match (Chic.) Distillers Securities Endicott Johnson F Fisk Rubber Fed. Mining & Sm. General Electric General Motors Goodrich Tire & Rubber Goodyear T. & R. (Curb) Greene Cananea Copper Gulf States Steel (Curb) H Hupp Motor (Curb) I International Agr. Corp. International Harvester International Nickel Int. Merc. Marine (Curb) Int. Paper Int. Steam Pump Inspiration Copper Jewel Tea K Kelly Springfield Kennecott Copper Keystone Tire & Rubber Lackawanna Steel Liggett & Meyers Lorillard, P. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 63 Rails Industrials M Manhattan S. Rwy. Mich. Central Mo., K., & T. Mo. Pac. M Maxwell Motors Mergenthaler (Bo.) Mex, Pet. Miami Copper Midvale Steel & Ord. N Nashville, C, & St. L. New York, C., & St. L. New York Central New York, N. H. & H. Norfolk & Southern Norfolk & Western Northern Pacific N ^ National Biscuit Nat. Cloak & Suit Nat. Enameling & Stamp. Nat. Lead Nevada Cons. Copper N. Y. Air Brake N. Y. Dock Otis Elevator P Pacific Coast Pennsylvania Pere Marquette Phila. R. T. Pittsburgh, C, C. & St. L. P Pac. Gas & Elec. (Curb) Pacific Oil Pan Amer. Pet. Peoples Gas Pittsburgh Brewing (Pitts.) Pressed Steel Car Pullman Punta Alegre Sugar Q R Reading Rock Island Soo Line Southern Pac. Southern Rwy. i Q Quaker Oats (Chic.) R Ray Cons. Copper Railway St. Spring Republic Iron & Steel Savage Arms Saxon Motors Sears Roebuck (Chicago) Sloss Sheffield Southern Porto Rico Sugar Standard Oil of Ind. (Curb) Standard Oil of N. Y. (Curb) Stewart Warner Stromberg Cork Studebaker Stutz Motor Superior Steel Swift & Co. (Chic.) Tenn. Coal & I. I I THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET RaUs U Union Pac. Industrials U Underwood T. W. Union Bag & Paper United Cigar Stores United Drug United Fruit (Bo.) United Gas Imp. (Phila.) United Pr. Sh. (Curb) United Retail Stores United Shoe Mach. (Bo.) United Verde C. (Bo.) U. S. Cast Iron Pipe & Fdy. U. S. Food Products U. S. Ind. Alcohol U. S. Realty & Impt. U. S. Rubber U. S. Smelt., R., & M. U. S. Steel Utah Cons. Copper (Bo.) W Wabash Va. Car. Chem. Vanadium Steel Vivadou W Westinghouse Elec. Western Union White Motor (Curb) Wickwire Spencer Steel Willys Overland Woolworth THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 65 Appendix B CASH DIVIDENDS Original items: Classified according to degree of discounting effectiveness. NO CHANGE IMP. -BOOM IND. 1. January 1, 1904 to January 19, 1906 Percentage of WITHIN Accuracy MOFl M-K Vt- -1 B.D. i i 1- D.A. "i i "i i -2 2—5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 • • 1 1 « • • • 1 • ■ 1 1 • • 1 1 1 1 1 1 1 • • 1 • ■ 1 1 1 1 • • 1 • • 1 • • 1 1 • • 1 1 • • • • i i *i i "i *i "i • • i i i 1 i TEE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 67 PERCENTAGE OF ACCURACY WITHIN 5 AND Hi 3Fl H-y2 ^-1 .D. 1—: 2 2- -5 OVER ITEM D.A. B.D. D.A. B.D. D.A. B D.A. B.D. D.A. B.D. D.A. B.D. 35 ■ • • • 1 1 36 1 1 37 • • • • 1 1 38 39 40 , ^ • • 1 41 42 43 44 , , 45 46 , ^ 47 48 49 50 51 52 53 54 55 • • 1 56 57 1 1 37 43 1 2 ) r 3 7 5 5 4 3. Noveml )er 16, 1907 to November 19, 1909 146 1 1 .. 1 147 1 1 148 , , i 1 149 • ■ 1 1 150 1 i 151 • • 1 1 152 1 i 153 • . I 1 154 • « 1 1 155 , , 1 156 1 i 157 1 1 158 1 1 159 « m , , 1 1 160 • • • • 1 1 161 ■ • • • 1 1 162 • • • • • « • • i • • 1 PERCENTAGE OF ACCURACY WITHIN ITEM 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 JiOFl D.A. 1 1 1 1 45 B.D. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I • 1 1 1 • • 1 • • 1 1 1 1 1 1 1 • • 39 }4-y2 D.A. 1 3 B.D. ^-1 D.A. B.D. 1—2 D.A, B.D. 2—5 I 5 AND OVER D.A. B.D. D.A. B.D. 4 5 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET » 5. December 24, 1914 to November 21, 1916 PERCENTAGE OF ACCURACY WITHIN MOFl H-H 'A-l 1 OF 2 1 2—5 5 AND OVER ITEM D.A, B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 1 1 1 • • • • • • • • 1 1 • • • • 1 1 1 1 1 1 1 i i ■ • 1 1 • • "i i 1 1 i i i 1 1 ■ • 1 1 1 i 1 2 • ■ 1 1 1 1 i ■ « i 1 1 i "i ' 14 14 1 2 5 4 1 2 PERCENTAGE OF ACCURACY WITHIN 5 AND MOFl H- ■'A H-1 1—2 2—5 OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 417 • • • ■ • » 1 1 418 • • • • 1 i 419 420 422 • • 423 • • 1 424 501 • • 502 . , 503 504 • • • ■ i i 505 • • 1 506 507 508 509 510 511 512 513 514 4 515 • • X 1 516 • • i i 517 518 27 27 ll 3 5 3 7 6 J 2 7. December 19, 1917 to November 3, 1919 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 ■ • 1 • • • • i i « • • • • • 1 • • • • 1 1 1 1 1 « • 1 • • i • • i • • • • • • 1 1 i 1 i 1 i *i i 601 602 603 604 606 607 611 613 614 616 617 618 619 NO CHANGE IMP.-BOOM 10. January 1, 1904 to January 22, 1906 RAILS 1 1 1 1 • 1 • • 1 • 1 1 • 1 1 1 • 1 • • 1 i 1 1 i "i i I>^ THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 7t PERCENTAGE OF ACCURACY WITHIN • H OF 1 Vs-'A 'A-l 1—2 2—5 5 AND OVER ITEM D.A. B.D. D.A . B.D D.A . B.D D.A B.D i 1 • • • • • • • • • • • • • • • • • • • • • • • • • • « • • • • • • • • • • • i D.A • • • • • • • • • • • • • • • • • • • • • • ■ • i • • • • • « • • • • • • • • • • • • ■ • • • • • • • • • « • • • • • « • • a . B.D . D.A . B.D. 625 628 629 630 631 632 633 634 635 637 638 639 640 641 642 643 644 645 646 647 648 649 650 651 652 653 654 655 656 657 658 659 660 661 662 663 664 665 666 667 668 669 670 671 672 673 674 1 • • • • • • • • • • • • 1 • • • • • • • • • • 1 • • • • • • • • • • • • 1 • * • • • • • • • • • • • • • • • • • • 1 • • • • • • • • • • 1 • • • • • • • • i i i • • • • • • • • • • • • • • • * • « • • • • • • • • • • • • • • • • • • • • • • • • • • • • "i • • i • • ■ • i • • • • • • • • • • • • i • • 1 • * • • • • • • • • • • • • • • • • 1 • • > • • • • ■ i • • • ■ • • i ■ • • • • • • • • • • • • • m • • • • • • • 1 • • • • • • • • 1 • • • • • • 1 • • 1 • • • • • 4 i • • • « ■ • • • • • • • ■ • • • • • • • • • • • • • i • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • ■ • ■ • ■ ■ • • • • "i • • i • • • • • • • • • • 1 • • ■ • • • • • • « • • • • • • • • • • :: • • t • • • • • • • • • • • • • • • • • • • • • • • • • ■ • • • • • • • • • • • • • • • • • • • • • • • ■ • • • • • • • • • • ■ • • • • • • • • • • • • • ■ ■ « • • • • • • • • • • • ■ • • • • • • • • • « • • • • • • • • • • • • • • • ■ • • ■ • • • • • t • • • PERCENTAGE OF ACCURACY WITHIN MOFl H-A A-l 1—2 2- -5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A, B.D. D.A. B.D. D.A. B.D. D.A. B.D. 675 676 677 678 679 680 681 682 683 684 685 686 687 688 689 690 691 692 693 694 695 • • • • • 4 * a i 1 i i i i 1 1 i 57 57 6 6 11 8 5 4 2 6 12. November 21, 1907 to December 30, 1909 762 763 764 765 766 767 768 769 770 771 772 773 774 775 776 777 778 779 780 781 782 783 1 • ■ 1 • • • • 1 1 • • « ■ • • • • 1 ■ • 1 i i i 1 1 • • 1 1 1 1 1 1 • • *i i i i "i i *i 1 i i 1 • • • • i 1 • • 1 i i i . . 13 THE DISCOUNTING OP DIVIDENDS BY THE STOCK MAEKRl PERCENTAGE OF ACCURACY WITHIN H OF 1 H~y2 y^\ 1—2 2—5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 784 785 786 787 788 789 790 791 792 793 794 795 796 797 798 799 800 801 802 803 804 805 806 807 808 809 810 811 812 813 814 815 816 817 818 819 820 821 822 823 824 825 826 827 828 829 830 1 • * • • • • • • • • • • • • • • • • ■ • • • • • • • • • • • • • • • • • • « 1 i « • • • • a • • i • ■ • • • • "i • • « • • • i • • 1 1 • • • • • • • • ■ ■ « • 1 i • • i • • • a • • • • • a i a • 1 a a i ■ • • • i • « a a a a ■ a » • "i a • • a a • • • a a a a "i a a • • • • • • i • • i a • i a a a « i a a a • i a • a a "i a a a a a • ■ • a a • a • a • a • a • a • a a a a a a • • ■ • a i a a a • • a • a • • a a • ■ • • a a a a a a a a « • a a a • • a a a a a a a a • a a • a • • a a a • a • a a a a • a a • • • • • • t a • • • • • • • t • a a • a a « a a a B • t • • a • • • a a • • • • a • a a • • a a • a • » • a • • • • • • • a • • 44 48 5 3 12 9 6 6 2 3 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 73 14. December 24, 1914 to November 6, 1916 PERCENTAGE OF ACCURACY WITHIN 901 902 903 904 905 906 907 908 909 910 911 912 913 914 917 918 919 741 742 743 745 746 )F 1 5 ANE > He H-'A K-1 [ 1—2 2- A. -5 OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D, B.D. D.A. B.D. 712 1 1 713 a • i i 714 a < 1 i 715 1 , , i 716 1 1 717 1 i 718 1 1 719 1 a a i 720 , , • ■ i i 721 , , 1 1 722 1 , . , , i 723 , , 1 1 724 1 1 725 1 1 726 1 1 727 1 1 732 1 1 •1- 10 11 4 1 2 1 1 4 0_ ol _ 1 1 1 1 i 1 1 1 1 1 1 16. December 19, 1917 to May 27, 1919 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 15 I! 14 It- THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET IS NO CHANGE DEC.-^DEP. 2. January 20, 1906 to January 15, 1907 PERCENTAGE OF ACCURACY WITHIN IND. M OF 1 lyi- 1 -y2 y2-i 1- -2 2-5 5 AND OVER ITEM D.A. B.D. D.A . B.A. D.A. B.D. D.A . B.A. D.A. B.D. D A. B.D. 71 1 1 72 • • • . • 73 • • , a 1 1 . 74 1 ■ • . . s , 1 ■ • 75 1 • • • • • 76 1 ■ • • • ■ ■ > 77 78 i 1 :: 1 • 79 1 • • • • ■ 80 1 • • 81 • • .. 1 • • .. 1 1 1 .. • .. 1 • ■ 82 , , 83 • • • • 84 • • , , 85 • • 86 • • , , 87 ' ' ' • • • • > ■ • 88 • • 89 . . , , 90 * ' * • • • • . , , 91 ' ' * • • • . • 92 • • .. i • 11.. ' * • • • • > > , , 93 94 95 i • • • ■ 96 ? 1 • • i .. .'." 97 98 1 ■ • 99 100 1 • • 101 1 ■ • '■'■ '.'. :: ;; 102 1 • • • • 103 104 1 • • .. i .'." ■ • • • 105 106 • • . . • i . . ." .' i •. .. '.'. • • 107 • • 108 1 ' ' • • 109 • • 110 111 • • • • .. "i ."." • • 112 " • • • • '* "• •• •■ • • 113 1 1 • • I:: :;|;. ' ' • • • • • • . - PERCENTAGE OF ACCURACY WITHIN 1 5 AND MOFl H-V2 K- -1 B.D. 1- D.A. -2 2- -5 OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 114 .. , , , , . • . • 115 . . . • • . • • • • ■ • * ' 116 . . ■ • • • • • • • • • 117 . . . . . . • • • ■ • • • ■ 118 . . ■ • • • • • • • • • . . 119 . . . • • • • • • ■ i • • • ' "i 120 , . • • . . • ■ • • • • • • • • 121 . . . . • • ■ • ■ • • • • • 122 . ■ ■ ■ • • • • • • • ■ • ■ • * 123 . , . . 1 . • • • • • • • • • 124 • ■ . . . . 1 1 • • • • • • • • 125 • • . • • . • • 1 • • • • • • 126 . . ■ • • • • ■ • • i . . • ■ 127 • • . . . . • • • • • • 128 . . • • . • • • • • • • • • • • 129 . . . . . • • • . . • ■ • ■ • • 130 • • • ■ . . . . 1 • • 1 • • • • • * 131 . . . . . . . • • • • • • • • • 132 , , . . . . . . 1 1 • • ■ • • • 133 . . • • • • • • • • • • • • 134 . . . . • • • • ■ • • • • • • • 135 • • . . . ■ • • • • 1 • • ■ • • • . ■ 136 . • • • . • • • • • • • • ■ ■ • 137 . . . • • • • • • • • • • • • • • • 138 . . . • • • 1 • • • • • • • • 139 . . . • • • • • • • • • "i 1 • • ■ • 140 . . ■ ■ • • • ■ 4 ■ • • • 141 . ■ . ■ . • ■ • • • 1 • • • ' 142 143 • • • ■ :; ' ' i ■ • i . • • • 144 . . • . • • • • • • • • • • 145 11 3 6 • " • • • ' II 59 51 2 2 9 2 4 1 1 6. November 22, 1916 to December 18, 1917 337 1 1 • • • • ■ • ■ > 338 1 1 • • • • 4 "i 339 • • • ■ • * 1 340 1 1 • • • • • • 341 a , 1 1 • • m • 342 1 1 • . • • 343 • « • • i 1 1 .. 1 .. 1 • ■ • • 1 r 5 2 1 1 1 1 ( L. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 8. November 4, 1919 to August 24, 1921 PERCENTAGE OF ACCURACY WITHIN H OF 1 H -'A M — 1 1—2 2- -5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 421 425 1 • • 1 i ■ ■ ' • * i • • 1 1 1 1 1 NO CHANGE DEC.-DEP. rails 11. January 23, 1906 to November 20, 1907 1033 1034 i 1 1 .. . • • 1035 • • > ■ -f • • • • 1036 1037 1038 ■ i 1 1 i .. .' ' • • • ■ 1039 1 • • • • i .. .. 1040 '.'. "i • ■ 1041 1042 • ■ 1 1 1043 1 1 1 . . 1044 1 • • • • 1045 1 i • ' • • 1046 1 ' * • « 1047 1 . . 1 • • mm 1048 1 ■ • • 1049 • • • • • • 1050 i . 1 • * • • 1051 1 . . • • • • 1052 1 * * • • • • • • 1053 • • i ' ' • • 1054 1 • . , , 1055 1 • > • • • • • • • 1056 • • 'i " * • • • • 1057 a ■ J i ■ • mm 1058 1 • • ■ • ■ a 1059 1 • • • ■ • t • 1060 1 • • • • • ■ • 1061 1 J- 3 1 • • • ■ • . 1 16 — 7 1 2 2 5 1 1 2 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 15. November 7, 1916 to December 18, 1917 PERCENTAGE OF ACCURACY WITHIN 77 1 5 AND HoFl H-y2 Vz-^ 1—2 2—5 OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 728 1 1 .. , , , , . . . ■ . . • • • • 729 1 1 • • . . • • • • • • • • ■ • • • 730 1 1 ■ • • • • • ■ • • ■ • • ■ • 731 1 1 ■ • • • • • • • • • 4 4 19. May 28, 1919 to June ;20, 1921 920 1 • • ■ > , , . . . ■ 1 • • 747 1 1 • • . . • • • • 748 , , • • . . 1 « 1 749 1 • • • • . . 1 . .1 t • • 750 « • , , 1 1 . . ' ' \ * ' 751 1 1 1 • • 4 1 1 2 1 1 1 INCREASES IMP.-BOOM IND. 1. January 1, 1904 to January 19, 1906 536 1 , , 1 , . • . . . . . • • . • • • ■ m 1101 • • , . . . 1 . . ■ • 1 m • 1102 1 1 • • • ■ ■ • . . • • • • ■ ■ • « 545 1 • • 1 • • • • • ■ 3 1 2 1 1 3. November 16, 1907 to November 19, 1909 529 547 1 1 1 • • • • • ■ 1 1 ■ • • • • • 2 1 78 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET ITEM 1147 1148 1149 1150 1151 1152 1242 1243 1244 1245 1246 1247 1248 1249 1250 1251 125.2 1253 1254 1255 1256 1337 1332 1323 1325 1326 1317 1318 1319 1320 1314 1338 1363 1364 1365 1370 1371 1372 1373 1374 1375 1376 1377 1378 1379 5. December 24, 1914 to November 21, 1916 PERCENT OF ACCURACY WITHIN >iOF 1 D.A. 1 1 1 1 1 1 1 i 1 1 1 1 1 1 1 1 i 1 1 1 1 1 1 1 B.D. 1 1 1 1 1 1 i 1 1 i 1 1 1 1 1 1 1 1 1 1 1 1 M-J^ D.A B.D. ^—1 D.A B.D. 1—2 D.A. B.D, 2—5 D.A 1 1 1 1 B.D 1 1 <1 1 i 1 1 .. I 1 5 AND OVER D.A. B.D. THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 79 ITEM 1380 1381 1382 1383 1384 1385 1386 1387 1388 1389 1390 1391 1392 1393 1394 1395 1396 1362 1342 1343 1344 1345 1346 1347 1348 1349 1350 1351 1327 1328 1322 1324 1321 1312 1313 1315 1316 1307 1308 1309 1310 PERCENT OF ACCURACY WITHIN HOFl D.A. 1 1 1 1 1 1 1 1 1 i 1 B.D. H-^ D.A. 1 1 B.D 3^-1 D.A. 37 1 1 1 32 B.D. 1—2 2—5 D.A. B.D, D.A. 1 1 B.D. 5 AND OVER D.A. 11 13 7. December 19, 1917 to November 3, 1919 1 1 I ■ 1 1 1 1 1 1 1 1 B.D. 1 • • ■ • 1 "i " " • • i . . • • ■ • • • * • • • 1 • • ■ ■ 1 • • a • , , , . 1 • • 1 i :: ■ ■ " 1 1 1 . . • • • • 1 • • . • • • • • 1 . . • . • ' " * 1 ;■. ri *i :; • • • • .. . . 1 i . . . • • ■ • • • • i 1 • • • • • • • • • • • • 1 • • i • • 1 • • 1 . . • • ■ • • • • ' • • • • 1 • • • • ■ • • ' ■ ' • • 1 • • ■ a * • •• • • i "i • • • • • • M THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET PERCENT OF ACCURACY WITHIN ^OF 1 H- -'A 'A- -1 1—2 2- -5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 1311 1301 1302 1303 1304 1305 1306 1 1 1 » • 1 • • 1 1 1 • • i i i • • • • • • i • • • • • • • « "i i • • i 18 12 1 1 1 5 4 4 6 7 1 2 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 14. December 24, 1914 to November 6, 1916 PERCENT OF ACCURACY WITHIN 81 KOFl Vs-'A H-1 1—2 2—5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 1423 1424 1401 1402 1 1 • ■ 1 i "i • • "i • • • • • ■ 1 • • ■ ■ 1 3 2 1 ll 1 9. August 25 , 192] I— 1146 1135 i 1 1 ■ • 1 1136 1 1 • • • • 1339 1340 "i i ;• i i 2 2 1 3 1 1 INCREASES IMP.-BOOM 10. January 1, 1904 to January 22, 1906 RAILS 1403 1404 . . 1 1501 • • - • 1 1502 • ' 1503 • ' 527 1 1255 1 1256 1 . . • • . . 6 8 1 1 12. November 21, 1907 to December 30, 1909 1509 1536 1 • • 1 i . . . . • • ■ • 1537 1 • • ■ . • . . . 530 1 ' ■ • ■ 1405 i • • 529 • • . . • * 3 5 1 1 1 1 18. J une 21, 1921— 1414 1 1 i i 1415 B , i 1416 1 1 i 2000 • • • ■ 2001 1 1 • • • ' ■ " 3 1 2 2 2 INCREASES DEC.-DEP. IND. 2. January 20, 1906 to November 15, 1907 1103 , , 1 • ■ 1104 . . 1 i • • 1105 i . . 1 • • 1106 1 • • 1107 1 1 • ■ 1108 ■ • 1 ' ■ 1109 1 1 ■ • 1110 1 • • i i nil . • 4 • • • ■ 1112 i . . 1 • • i 537 . . • • 538 i 1 • • i 546 1 . . M 4 • • 521 • • 1 1 • • 522 1 i 1 1 1 4 5 2 I 6 6 1 1 1 V> sL THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET 4. November 20, 1909 to December 23, 1914 PERCENT OF ACCURACY WITHIN ^OFl 1 H-h I Vr-l 1—2 2—5 5 AND OVER ITEM D.A. B.D. D.A. B.E K D.A. B.D. 1 O.A. B.D D.A. B.D. D.A. B.D. 523 1 1 524 525 1 • • i 1 1 « <• a a • a • « 526 • • 1 1 ' ' • • • • a • 548 1 1 " • a • ' • " • • ■ • • 540 * " • • i i 1 1 • • • • 541 542 i i . . ■ • • ■ ' * 543 i ' i • • • • 544 1 1 • • 1238 1 1 • . • • 1239 1 1 • • • • • • 1240 1 1 • « > ' • • • a • 1241 • • 1 1 ■ • ■ • • . . • • 1252 1 1 • • • ■ ' • • - - 1253 i i .'.' " • • • 1254 1 1 ... • • a a 1113 1 1 .. .. a ■ • • • • • . 1114 1 "i • ■ • ' • • 1115 1 1 • • a • • " • • 1116 1 1 • > • • • • ■ a a ■ 1117 1 1 • • a ■ " * • • • 1118 1237 ■ • • • ■ ■ :: :: • i i 1 i • ■ a a > • a a 13 9 4 1 1 4 2 6 4 4 6. November 22, 1916 to December 18, 1917 1397 1398 1 1 1 1 1399 1 1 1400 1 1 1401a 1 1 1402a 1 1403a 1 1404a 1 1 1405a 1 1 1406a • • 1407a 1 1408a • • 1 i 1 1409a • • 1 1410a 1411a 1 1 1 .. 1 .. .. .. .. .'." i i ;:l:: . . • THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 83 PERCENT OF AC :CURA lCY WITHIN 1 1 1 5 AND HOF • 1 H- H V2- D.A. 1 B.D. 1—2 2 — 5 1 OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 1412a • • 1 • • . . • ■ 1 1413a « . 1 • . • • • • 1 ■ • • • ■ • • • 1414a 1 1 . • • • i • • • • • • 1415a • • ■ . . • • • • • 1 • • • • « . 1416a 1 a a . . 1 • • • • • • a a ■ • 1201 • • 1 ■ a • • 1 i a a 1 • • 1202 • • ■ • • • a a • • • • 1203 1 1 . . • • • • • • • • • • • a 1204 1 1 . • • . • ■ • • • • 1205 1 1 • . • • • • • • • • 1206 , . 1 • • • • 1 ■ • • • ■ • • • . .> 1207 1 1 . . . • • • • • • • • • • • • ■ 1208 1 1 • • • • ■ • • • • • • • 1209 1 1 • • • • • • • • • • • • • • • • 1210 1 1 • • • • ■ • • • • • • • • ■ • • 1211 1 1 . . • • • • • • • • • • • • • • 1 1 1 1212 1 • • i 1 1213 • • • • ■ • 1214 • ■ • • • • i 1215 • a 1 • • • • • • 1216 • • • • i i 1 1 • • 1217 • • • ■ • • 1218 i • • • • • • • • • • ■ • 1219 1 • • • a i 4 • • • • • • 1220 a • • • • ■ • ■ • • 1221 ■ ■ 4 1 1 • • • • • • 1222 , • . • • • 1 i "i • ■ • • 1223 a > • • • • • • • • 1224 • • • • • • • • • • 1225 . . • • 1 • • 1226 • • 1 • • 1227 . . • • 1 . . 1228 ■ • • • • • • • 1229 ■ • » • • • • • • • • • ■ • 1230 a • • • ■ • • • 1231 • • • • • • • • ■ • 1231a • • a • • • • • • • • • 1232 ■ • • • 1 a ■ . . • • • • 1233 a ■ • • • • • • • • ■ a 1234 . . • • • • • • 1235 a a - • • • 1 1 • • • ■ • ■ 1236 X • • a • • a • • • • 1357 a • ■ • ■ a 1358 • • • • • • • a • • • • 1359 « • a • • ■ • • • • • • 1360 1 • • • • a • • • • • 1361 • ■ • • • • ■ a • • • • " • • • 1366 • • • • • • a • a • ■ a ♦ • ■ • 1341 • • • • • • ■ • 1 1 • • • • • •' • • 39 39 4' 3 7 4 6 10 5 5 3 3 S4 it, m THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 8. November 4, 1919 to August 24, 1921 PERCENT OF ACCURACY _^ WITHIN ITEM 1356 1352 1353 1354 1355 1329 1330 1331 1137 1138 1139 1140 1141 1142 1143 1144 1145 1119 1120 1121 1122 1123 1124 1125 1126 1127 1128 1129 1130 1131 1132 1133 1134 1333 1334 1335 1852 1853 MOFl D.A. 1 1 1 i 1 1 1 1 1 1 1 1 1 i 1 1 1 19 B.D. 1 1 1 1 1 i 1 1 1 1 i 1 1 1 1 1 19 H-'A D.A, B.D. H-1 B.D D.A. 1 1 1 2| 1 1—2 D.A. B.D. 2—5 D.A 1 1 1 1 B.D. 1 1 1 1 8 5 5 AND OVER D.A. B.D. 1 i IWCKJSASES DEC.-DEP. 11. January 23, 1906 to November 20. 1907 RAILS 1504 1505 • M M . • . 1506 1 1 " • X 1 1507 * ■ • • i 1 1 1508 ■ " i • • 528 1 i , , • • t m 1 1 2 1 2 2 3 1 1 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 85 13. December 31, 1909 to December 23, 1914 PERCENT OF ACCURACY WITHIN 1412 MOFl H- -H V2- -1 1- -2 2—5 5 AND OVER ITEM D.A. B.D. D.A. B.D. i i D.A. 1 • • i B.D. 1 *i "i 1 i i D.A. • • 1 • • i i B.D. i D.A. i • • B.D. D.A. B.D. 531 532 533 534 535 538 1510 1511 1512 1406 1407 1408 1409 1410 1411 i 1 i 1 1 ■ • • • 1 1 1 1 • • i "i • • • • • • • ■ 1 i 1 i 9 5 2 2 6 3 1 1 1 15. November 7, 1916 to December 18, 1917 17. May 28, 1919 to June 20, 1921 1425 • ■ 1 , , 1 , . , 1426 . . . . 1 1 1427 ^ ^ i . . . . 1 1417 • • 1 1 1418 • • i i . . . . 1419 i . . . . 1 1420 1 . . . . 1 1421 i . . . . 1 1422 1 1 . . . . 1369 1 1 4 J__ 2 1 1 1 3 2 3 2_ 0__ 2_ I 11 0|0|0|Oll|0'OiO'OIOIO THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 1608 1611 1617 1618 1619 1610 1722 1723 1724 1725 1726 1727 1728 DECREASES IMP.-BOOM 1. January 1, 1904 to January 19, 1906 PERCENT OF ACCURACY WITHIN IND. M< OF 1 H-H H-1 1—2 2—5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. 1 1 B.D. D.A. B.D. D.A. B.D. 1601 1602 1603 1613 1614 1615 1616 i i i i i 1 1 i i 1 • ■ i 1 2 2 1 3 2 2 2 3. November 16. 1907 to Nov. 19, 1909 1 i i 1 1 1 1 1 8 1 i 7 I 7" 1 i i 5. Decern ber 24, 1914 to November 21. 1916 1818 ■ • 1 1 1819 1705 » • 1 • • i 1 .. .. 1 • • 1706 1 1 • • 1707 1708 i i 1 i 1709 « • 1 • • 1 1710 1711 i i .. .. 1 1 1712 1 1 • • 1713 ■ • 1 1 • « 1714 1 1 • • 1715 1 • • 1 1 • • • • 7 5 2 1 1 3 1 2 1 2 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 87 7. December 19, 1917 to November 3, 1919 PERCENT OF ACCURACY WITHIN 5 AND Hot •1 }i-y2 'A- -1 1- -2 2- -5 OVER 1 ITEM D.A, B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 1762 1 1 » ■ 1763 ■ • ■ • ■ i . . i 1764 1 1 . . 1765 1 1 1766 1 1 - . 1767 1 ■ ■ • ■ • i 1768 « • • 1 i 1769 a • 1 1 1770 i i 4 3 £_ 1 2 3 4 0__ 2 DECREASES IMP.-BOOM 10. January 1, 1904 to January 22, 1906 RAILS 9. August 25, 1921 — 1861 ■ • • , , 1 . . 1 1862 ■ • • • . . . . . 1 1 1863 . . . 1 1 . . . • 1812 • • . ■ • • 1 1 1813 1 i • • . . . . • ■ 1814 • • • . . 1 . . 1 • • 1815 . — 1 • • • • 1 1 1 0_ 0_ 2 2 4 4 1620 1 • • 1 .. 1 , , , , . . 1626 1 1 , , . . . . . . . . . . ■ ■ . . 1624 1 1 — . 2 3 1 12. November 21, 1907 to December 30, 1909 1625 • • ■ • • 1 1 1627 1 1 , • . , • . . . . 1628 • • , , 1 1 . . . . 1629 1 1 , • . . . . . . 1630 • ■ • • . • 1 1 1631 • • ■ • . • . . 1 . . 1 1622 1 • • 1 • • • 3 2 1 1 3 1 3 «8 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 14. December 24, 1914 to November 6, 1916 PERCENT OF ACCURACY WITHIN 5 AND H< OF 1 1 D.A. — 1 1—2 2—5 OVER ITEM D.A. B.D. D.A. B.D. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 1838 1 1 1839 1 1 1840 • « 1 1 1841 1 1 1842 1 i • • • • 3 3 1 1 1 1 16. December 19, 1917 to May 27, 1919 1821 1822 1823 1 1 • • i 1 • • i • • 1 2 1 1 1 1 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 99 4. November 20, 1909 to December 23, 1914 PERCENT OF ACCURACY WITHIN ITEM 1701 1702 1703 1704 1716 1717 1718 1719 1720 1729 1609 1612 1820 ^ OF 1 D.A. 1 1 1 B.D. 1 1 1 1 1 1 1 1 1 8 H-y2 D.A. B.D Vz-l D.A. B.D. 1—2 D.A. B.D, 2—5 D.A. B.D 1 1 5 AND OVER D.A. B.D 3 2 6. November 22, 1916 to December 18, 1917 8. November 4, 1919 to August 24, 1921 18 J une 21, 1921- — 1825 1 1826 1 1855 1 1 1856 1 1857 1 1367 • • 1 1 1368 1 */ 4 1 1 1 1 1 DECREASES DEC.-DEP. 2. January 20, 1906 to November 15, 1907 IND. leci 1605 1721 1 1 i i 1 i 1 i • • • • • • 1 1 1 1 1771 1 1772 1 1773 • ■ 1774 • • 1775 • « 1776 • • 1777 1 1778 1 1779 • • 1780 1781 1782 1783 1784 1785 1786 1787 1788 1789 1790 1791 1792 1793 1 1 ■ • • • 1 • • 1 1 i 1 i • • i • ■ i • • • • • ■ • ■ • • • • • • • • • • • • • • i 1 • • i 1 • • 1 1 1 "i 1 1 • • 1 i 1 i "i 1 i 1 i 1 • * • • i 1 • • « • • • • • 1 • • • • • ■ 1 90 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 91 ^ ITEM 1794 1795 1796 1797 1798 1799 1800 1801 1801a 1802 1803 1804 1805 1806 1807 1808 1809 1810 1811 1816 1817 1730 1731 1732 1733 1734 1735 1737 1738 1739 1740 1741 1742 1743 1744 1745 1746 1747 1748 1749 1750 1751 1752 1753 1754 1755 1756 PERCENT OF ACCURACY WITHIN MOF 1 D.A. 1 1 1 i 1 1 1 1 B.D. 1 1 1 1 1 1 1 1 1 1 1 1 H-'A D.A, B.D. 34-1 D.A B.D, 1—2 D.A. B.D. 2—5 D.A. 1 1 1 1 1 5 AND OVER B.D 1 i D.A, 1 i 1 i .. I ^ I i I .. B.D. 1 1 1 ITEM 1757 1758 1759 1760 1761 1859 1860 1864 1865 1866 1867 1868 1869 1870 1871 1621 PERCENT OF ACCURACY WITHIN HOF 1 D.A. 1 i 1 1 B.D. H- D.A, 27 1 1 30 B.D. 3^-1 D.A, B.D 1—2 D.A. 2—5 B.D. I D.A. 1 4 11 B.D 1 1 5 AND OVER D.A, 1 1 29 1 1 i 1 1 1 B.D. 1 1 22 DECREASES DEC.-DEF. RAILS 11. January 23, 1906 to November 20, 1907 1 1 In I 25 \ 01 0111 1010 OjOllOIOTOlO 13. December 31, 1909 to December 23, 1914 1827 1828 1829 1830 1831 1832 1833 1834 1835 1836 1837 1843 1844 1845 1846 1847 1848 1622 *i i 1 • • « « "i 1 • • 1 • • • • • • « ■ • * i • • i • • ■ • i * i i i 1 i i i • • • • 1 • • • • • • 1 1 i • • • • 1 • • 1 1 i i 3 4 4 1 1 2 4 3 3 3 1 3 5 1 n THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 17. May 28, 1919 to June 20, 1921 PERCENT OF ACCURACY WITHIN HOF 1 r — • M-1 1—2 2—5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 1 D.A. B.D. 1849 1850 • • 1 • • 1 1 1 • • • • 1851 1854 • • • • • • 1 • • i • • • • 1858 1824 i • * • • 1 • • • • 1 1 » ■ 1 • • 1 • • • • 1 2 1 2 2 3 1 Appendix C STOCKS DECLARING "RIGHTS" AND STOCK DIVIDENDS (Listed on New York Stock Exchange, unless indicated otherwise.) THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET 93 Rails D D., L., & W. Great Northern H I Illinois Central J K Industrials D Detroit Edison DuPont de Nemours Endicott Johnson F General Chemical General Electric General Motors Gillette Safety Razor (Curb) Gray & Davis (Bo.) H G. W. Helme (Curb) I International Harv^ester International Motor Truck K Keystone T. & Rubber Rails A Atchison, T., & St. Fe Atlantic Coast Line B Boston & Maine (Bo.) Chic, Milw., & St. P. Chic. & Northwestern Cleveland, C, C. & St. L. Industrials A Amer. Brake Shoe & Fdy. Amer. Cigar (Curb) Amer. Cotton Oil Amer. Gas & Elec. Amer. Rad. (Chic.) Amer. Steel Foundries Amer. T. & T. Amer. Tobacco Atlantic Ref. (Curb) Atlas Powder (Curb) B Continental Oil (Curb) Col. Graphaphone Cramp Ship (Phila.) Crucible Steel Cumberland Pipe Line (Curb) Louisville & Nashville M N New York Central Norfolk & Western Northern Central (Bait.) Northern Pacific Lee Tire & Rubber Leow's Theaters (Bo.) Libby, McNeill, & Libby (Chic.) Lorillard, P. M • Manhattan Shirt May Dept. Stores Mergenthaler Lino. (Bo.) Mexican Pet. Middle States Oil N National Biscuit National Carbon (Chic.) National Lead North American Co. O Ohio Oil (Curb) Otis Elevator Owens Bottle a 94 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET Rails P Pennsylvania Q R Seaboard Air Line (Bait.) Southern Pacific U Union Pac. Industrials P Pac. Gas & Elec. Packard Motor Pan Amer. Pet. Pittsburgh Plate Glass (Pitts.) Prairie Oil & Gas (Curb) Prairie Pipe Line (Curb) Pullman Pure Oil Q Reynolds, R. J., Tobacco (Curb) Sears Roebuck (Chic.) Solar Refining (Curb) South Penn Oil (Curb) Southern Porto Rico Sugar St. Joseph Lead Standard Milling Standard Oil of Kansas (Curb) Standard Oil of Neb. (Curb) Standard Oil of N. J. (Curb) Standard Oil of N. Y. (Curb) Standard Oil of Ohio (Curb) Standard Screw (Curb) Stromberg Carb. Studebaker Stutz Motor Tenn. Coal & Iron Tobacco Prod. Exp. (Curb) U United Gas Imp. (Phila.) Union Oil of Cal. United Cigar Stores United Fruit (Bo.) United Retail Stores United Shoe Mach. (Bo.) U. S. Rubber V Vacuum Oil THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 95 w Y Z W Westinghouse Elec. Weyman Bruton (Curb) Wilson & Co. Y Z Appendix D "RIGHTS" AND STOCK DIVIDENDS Original items: Classified according to degree of discounting effectiveness IMP.-BOOM IND. 18 21 23 98 99 100 101 109 110 1. January 1, 1904 to January 19, 1906 PERCENT OF ACCURACY WITHIN HOFl H- -y2 Vt -1 1- -2 2- -5 5 AND OVER ITEM D.A. B.D. D.A. B.D, D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 3 6 7 1 1 1 1 i "i • • • • • • ■ • • • * • 1 3 1 1 3. November 15, 1907 to November 19, 1909 1 1 1 1 i 1 5. December 24, 1914 to November 21, 1916 1 1 i 1 1 1 1 1 . . ! 1 I THE DISCOUNTING OP DIVIDENDS BY THE STOCK MARKET 7. December 19, 1917 to November 30, 1919 150 154 155 156 157 162 163 166 168 169 170 171 173 174 175 176 177 180 181 185 187 190 191 196 197 198 199 201 204 206 208 210 212 PERCENT OF ACCURACY WITHIN 5 AND Hi OF 1 H- -H y2- -1 1—2 2—5 OVER I ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 41 • • • m « • 1 1 44 1 i 47 1 • ■ 1 49 1 1 50 » ■ , , 1 1 • • 51 • • ■ • 1 1 3 2 1 1 1 2 2 9. August 25, 1921- 1 1 1 1 1 i • • 1 • • 1 1 1 1 1 i i i i i • • i i 1 1 • ■ 1 • • 1 1 1 1 1 1 1 1 1 1 1 i i THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 97 PERCENT OF ACCURACY WITHIN 5 AND ^OF 1 H- -'A H- — 1 1—2 2- -5 OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. 213 1 1 .. .. , , . . , , , , . . 214 1 1 . , , , . . . . . . . . . . . . ■ • ■ • 216 , , . . . , 1 1 . . . . . . . . 218 1 1 ■ • a ■ 19 20 3 1 5 3 9 5 1 8 12 IMP.-BOOM RAILS 10. January 1, 1904 to January 19, 1906 1 1 , , 1 . . 2 1 1 , , , , . , . . . . . . . . . . 4 . , , , , . , . , . . . . 1 1 . . . ■ 5 1 1 • • • • • • • ■ • • • • 2 2 1 2 1 12. November 19, 1907 to December 31, 1909 22 , , , , 1 1 . . . . . . . . . . 24 1 , , , , . . 1 . . . . • • • ■ • • 25 1 1 , , ■ ■ • . . . • . 26 1 1 • • • • • • 3 2 2 1 2. January 20, 1906 to November 15, 1907 DEC.-DEP. IND. I 1 I I I i 1 I I 1 I I I 4. November 20, 1909 to December 23, 1914 30 ■ • ■ • 1 1 . « • • • 31 1 1 . . . 32 1 1 . 36 1 . 1 . . 108 1 1 111 1 1 . . ■ . 113 1 1 . ■ . . . 114 ■ - • • • 1 1 4 5 1 1_ 0_ 2 1 1 1_ THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET 99 i LA 117 118 119 121 123 124 125 127 128 131 132 136 138 143 144 145 147 52 53 54 55 57 58 59 64 67 71 72 73 74 75 76 78 80 6. November 22, 1916 to December 18, 1917 PERCENT OF ACCURACY WITHiN PERCENT OF ACCURACY WITHIN 5 AND ^OFl H-'A H-1 1- -2 B.D. 2- D.A. -5 B.D. OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. D.A. B.D. 102 1 1 103 ^ , . , i i ■ ■ 105 1 1 . . . . ■ • 106 1 1 . . . . . . . , 107 1 1 1 3 3 1 1 1 1 1 1 1 1 1 1 1 1 8. November 4, 1919 to August 24, 1921 1 1 1 1 1 MOFl H-'A ^-l 1-2 2- -5 5 AND OVER ITEM D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. D.A. B.D. • • i • • 1 1 D.A. B.D. 81 S3 U 86 87 88 89 90 91 92 95 94 • • • • i • • ■ • "i 1 1 1 1 1 1 • • • • • ■ • • 1 1 1 i i i 1 1 i i 1 • • i 1 20 24 4 1 8 6 10 11 4 ^^ 4 104 15. November 7, 1916 to December 18, 1917 DEC.-DEP , RAILS 11. January 23, 1906 to November 20, 1907 8 • • 1 . • 1 9 1 1 . . . . 10 • ■ 1 1 11 , , • • 1 1 n 1 1 14 1 1 15 1 1 16 1 1 17 1 1 19 • • « • 1 1 20 1 1 ■ • 7 7 1 3 3 1^ _ IL 13. December 31, 1909 to December 23, 1914 28 1 1 . ■ • ■ 33 . • • 1 1 5$ 1 1 • ■ 39 1 1 40 1 1 • • • • 4 4 1 1 "j — 1 I I I I I I I 1 1 I t) ( I V I l' ' 100 THE DISCOUNTING OF DIVIDENDS BY THE STOCK MARKET BIBLIOGRAPHY A. Primary: 1. Commercial and Financial Chronicle, weekly issues, 1904-1922, incl. New York. 2. Philadelphia News Bureau. Daily News Bulletins, 1904-1922, incl. Philadelphia. 3. Wall Street Journal, daily, 1904-1922, incl. New York. 1 B. Secondary: 1. Brookmire, James H. "Methods of Business Forecasting Based on Fundamental Statistics." American Economic Review, March, 1913, Vol. II. 2. Conant, Charles A. "Wall Street and the Country." G. P. Putnam. New York, 1904. 3. Dewing, Arthur Stone. "The Financial Policy of Corporations." Vol. IV. Ronald Press. New York, 1921. 4. Hamilton, William P. "The Stock Market Barometer." Tables of Dow-Jones Average Prices in Appendix. Harpers. New York, 1922. 5. Huebner, S. S. "The Stock Market." D. Appleton & Co. New York, 1922. 6. Jordan, David F. "Business Forecasting." Prentice-Hall, Inc. New York, 1921. 7. Meeker, J. Edward. "The Work of the Stock Exchange." Ronald Press. New York, 1922. 8. Nelson, S. A. "The A, B, C, of Stock Speculation." S. A. Nelson. New York. S i n ■^ I I PRINTBD BY WKSTBKOOK PUBLISHIMG CO.] PHILADELPHIA,, PA. 'tkSh, If** /^ rioT'^^ Mi^ 10"^ Datp: Due :dt©s Kulp The discoiinting of dividends by the stock market3 APR \1'^. ^X 9 ^ii«i» \ii^ a VU;;^-^^^^ A^A-A^ ^AY13 1932 COLUMBIA UNIVERSITY UBRARJE^ ^ ^^ 0041449371 i '^^A^^- .; i, ii si- ' END OF TITLE