How Dividend Yield Juicing Hurts Retail Investors

In theory, the only thing that investors care about when comparing investments are the relative risk-adjusted rewards, but you don’t have to spend much time watching the market to know that people value all kinds of things that they shouldn’t. Dividends, for example, aren’t necessarily a good thing (better than sitting on cash, worse than productive re-investment), but it’s still something that many investors use as an absolute measure of quality.

“Some mutual funds purchase stocks before dividend payments to artificially increase their dividends, which we call ‘juicing’,” write Lawrence Harris and David Solomon of the University of Southern California Marshall School of Business and Samuel Hartzmark of the University of Chicago Booth School of Business in their paper...