Alternative event study methodology for detecting dividend signals in the context of joint dividend and earnings announcements

Friction models are used to examine the market reaction to the simultaneous disclosure of earnings and dividends in a thin-trading environment. Friction modelling, a procedure using maximum likelihood estimation, can be used to replace both the market model and restricted least-squares regression in event studies where there are two quantifiable variables and a number of possible interaction effects associated with the news that constitutes the study's event. The results indicate that the dividend signal can be separated from the earnings signal.