Inderscience Publishers

The impact of risk factors on stock returns: the case of the National Bank of Greece

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The purpose of this paper is to examine the potential association between the realised rates of return and both the beta coefficients and the anticipated dividend yields. This study focuses on the National Bank of Greece (NBG), which is the oldest and largest among the Greek banks and heads the strongest financial group in Greece. The hypothesis that is tested is that the stock returns of the NBG is a function of its beta (i.e. its systematic risk), its dividend yield and the bank's last year's payout ratio and last year's earnings per share. An empirical investigation was conducted in a sample period of seven years, starting in January 1996 and ending in December 2002. The monthly data were employed. The findings of this paper suggest a considerably more complicated relationship between returns realised on common stocks and dividend yield than has been revealed in prior work. More specifically, the returns of the NBG's stock are negatively affected by the beta coefficient, the dividend yield and the lagged dividend payout ratio and positively by the lagged earnings per share ratio. There is evidence that there is a clientele effect among investors in favour of capital gains than dividends.

Keywords: dividend policy, rates of return, beta coefficients, anticipated dividend yields, earnings per share ratio, Greek firms, stock returns, National Bank of Greece, dividend payout ratio, capital gains, dividends

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