Dividend Policy a Key to Success

The first stripe suggests that if merchandise returns exceeds the risk-free rate for the month, the month is considered a bull (up market) month. Since this is a month-by-month consideration of the market, it is a short-term measure.

The second measure groups months depending on the trend in neighboring months. Thus during recent times, nigh months would be categorized as bull markets, but a bull market month which occurred in the midst of some(prenominal) birth market months would be categorized as a turn out market month. The authors use this as an intermediate measure of market conditions.

The third measure is a long-term approach path that defines a bull market as maven in which a 10 percent increase from the previous low-spirited is achieved. Similarly, a bear market under this definition is one in which a 10 percent decline from a previous high is reached. This is a long-term measurement because a 10 percent change in either educational activity can take as long as a year to materialize.

Using these definitions, the authors note a positive relationship between portfolio yield and portfolio return during bear markets and a prejudicial relationship between portfolio yield and portfolio return during bull markets (310). This gist that the level of return and yield move together during bear (down) markets, and move in opposite directions during bull (up) markets.

Recognizing that the results could be touch by the risk factors associated with the stocks, the authors next move to control for these diff

However, purchasing its own shares of stock, even during a bear market, requires additional capital that the company may not have available. Since the dividend is to be maintained regardless of the market conditions (assuming that the company's financial performance is adequate), it is up to management to provide directors with the capital they penury to accomplish both tasks, when necessary. By using the information that Gombola and Liu provide, managers may take appropriate steps during bull and bear markets in order to provide the directors (and thus the owners) with the best capital building possible for the market conditions.

Dividend policy is set by the tabular array of directors of a corporation, but it is up to the management to ensure that adequate resources are available to maintain that policy. Dividend policy is not a subject to be taken lightly since any deviations in policy can signal a downturn in the organization's fortunes, or a significant change in the company's strategy.

Gombola, Michael J. and Feng-Ying L. Liu. "Dividend Yields and inventory Returns: Evidence of Time Variation Between Bull and pay Markets." The Financial Review, 28 (August 1993): 303-327.

Potential investors examining various companies can too make use of the information that Gombola and Liu provide. By considering the bull and bear market characteristics of the market as a whole, investors (and creditors) can consider whether a company's performance is in line with Gombola and Liu, or whether it outperforms (or underperforms) the anticipate outcome.

erences. Even after adjusting the returns for risk, seasonality and the size of the company, the authors observe that their original results noneffervescent hold (318, 319). Indeed, the authors find that high yield stocks perform break dance during bear markets than might otherwise be expected, supporting the presumption that high yield stocks are more resistant to market declines than low yield stocks.

Directors are even more wakeful about
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