Analysis reveals that buying pressure from dividend payments predicts market returns, indicating price pressure is widely observable.
We demonstrate that predictable uninformed cash flows forecast aggregate market stock returns. Buying pressure from dividend payments (announced weeks prior) predicts higher value-weighted market returns, with returns for the top quintile of payment days four times higher than the lowest. This holds internationally and increases when reinvestment is high and market liquidity is low. We estimate a market-level price multiplier of 1.9. These results suggest price pressure is a widespread result of flows, not an anomaly. (JEL G12, G14, G35)
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Hartzmark et al. (2025) studied this question.
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