The idea that the set of investors attracted to a particular kind of security will affect the price of the security when the company's policies or circumstances change is called:
A)The signal effect
B)The information effect
C)The dividend preference theory
D)dividend clientele effect

Question

Quizplus · Accepted Answer

The dividend clientele effect states that investors with a preference for a certain type of dividend (such as high or low payout ratios) will hold a particular stock, and if the company changes its dividend policy, those investors may sell the stock, which will affect the stock's price. Thus, the set of investors attracted to a security affects its price. The signal effect and information effect both refer to the impact that news, events, or policies have on a stock's price. The dividend preference theory is a concept that states that investors prefer current dividends to future capital gains.

The Idea That the Set of Investors Attracted to a Particular