Broke $30 today! At this momentum it should carry past $31 on or before divvy date.
I'm currently doing a study starting 2 months prior to the dividend date for the last 2 years. It seems like the faster previous stock prices have been reached the higher the stock goes that quarter. I'm calling this "Momentum to Price Correlation" 'cause I don't know what else to call it. Has anyone noticed the same effect? Are there studies related to this someone can point me to?
This quarter we broke $30 at least 30 days out from divvy date - last quarter we broke it 10 days out from divvy date. Seems to me that the stock breaking $31 on divvy date is a good bet.
I'm not done with the study and any guidance is greatly appreciated. This only seems to work with stable high yield stocks. If we could quantify this into a formula we may be able to use it in other industries.
I have been thinking of the same type of thing. Between the automatic adjustment of the PPS on the open after ex-div, and the next ex-div, the dividend has to be rebuilt into the stock. In an interest rate of zero zone this would be done in the same increments each day, with catch-ups on Mondays for the weekend. Obviously this doesn't happen, as the rebuild apparently takes place late in the quarter.
Is this the effect of interest rates and the time value of money? Is it because the dividend is only a know quantity after declaration date, which compresses the adjustment period? Are there other reasons?
However; not sure you have to understand it to model it, as the evidence is in the past behaviour.
The only flaw of this $31+ by Ex prediction is there is the possibility of a SPO issued between now and ex. If it happens, depending on when spo occurs, the pps before ex could not reach $31. Any objection?
Yes, objection. December 9th 2010 SPO didn't prevent AGNC from closing at 1.26*bv on the last day og the divvy run up 20 days later. That would be $32.71 now. Also, the intraday high 4 days b4 xd on that divvy run up corresponded to $33.23.
Interesting perspective. You will be remiss (apologies if you have already done this) if you haven't included the effects of any SPOs circa your data timing. SPOs typically "reset" the price momentum. Take a look at the effects of the December 2010 SPO; from close on 11-30-10 (pps 29.31) to close on 12-28-10 (pp 29.57). The gain was $.26. I attribute this to the SPO announced AH on 12-8-10. Although share price recovered very quickly, the momentum was destroyed. Good luck with your research.
I think you guys have a valid point concerning the spo. I wasn't sure where to place it in my formula then I considered it as the "Reset Price".
In other words look at historic price data vs. current price to obtain a "quantitative momentum". This will give you an approx price by dividend date and subtract the difference of the fully expected spo's approximate pricing.
You'll notice that after every spo the price is recovering quicker than last time. Why? Not sure. I hope I'm making sense. I wasn't a business major at school.
Bottom line expect an spo and use how fast the price recovers after the spo to give you an idea of momentum going forward and use that to gauge an approx price for the next divvy date.
Doing this I came up with an approx price of $31.50 to $32 by divvy date.