Dividend Analysis of Dow Jones Asia Select Dividend 30 Index

Abstract

This article examines the relationship of the Dow Jones Asia Select Dividend 30 Index (DJASD) with six Asian market indices, namely, the Bombay Stock Exchange (BSE), the Jakarta Stock Exchange (JKSE) Index, the Korea Composite Stock Price Index (KOSPI), the Nikkei (Japan), the Shanghai Stock Exchange (SSE), and the Taiwan Stock Exchange Corporation (TSEC). It involves the calculation of coefficient of correlation and coefficient of determination to explain the pattern of variance of the DJASD Index with the aforesaid six independent indices. As a first step, data reduction is performed on these indices to extract a principal component that best describes the variance in the data set. This is followed by performing an analysis for robustness using two methods. Both methods give approximately the same results, authenticating the reliability of the analysis. The results show that the DJASD Index has a low positively correlation with the principal component (that represents BSE, JKSE, KOSPI, Nikkei, SSE, and TSEC).

TOPICS: Wealth management, exchanges/markets/clearinghouses, information providers/credit ratings

Key Findings

• • The performance of the DJASD has a weak correlation with the performance of the financial markets.

• • The dividend payout is largely related to the performance of the companies included in the index.

• • The investors cannot expect higher dividends when financial markets are performing well.