Past studies have shown that ex-dividend stock prices are not fully reflective of dividend payments. A tax-induced clientele effect and micromarket limitations in stock pricing have been used to explain this pricing anomaly, This study focuses on the ex-dividend behavior of real estate investment trusts (REITs). Due to a low correlation between dividend size and dividend yield, REITs permit a cleaner examination of a tax-induced clientele effect. The results indicate that tick constraints in pricing ex-dividend stocks create the appearance of a taxinduced clientele effect in REITs when none should exist.
