| Περίληψη : | The effect of dividend policy on stock prices has been a source of debate and detailed exploration in the world of finance. The main focus of this paper is to present an alternative measure to calculate dividend surprises, based on option and stock prices. We believe that this model is superior to the predominantly employed Naïve model. In the course of this paper it will be proven that the proposed model is more highly correlated with the market reaction on the announcement day and that it incorporates more information in comparison to the Naïve model. An additional advantage of this model is its insensitivity to the choice of options used. We also examine the predictability of the dividend surprises calculated through this new model and we conclude that neither stocks with positive dividend surprise, nor stocks with negative dividend surprise realize, two days after the announcement, significant abnormal returns. Our research has been based on the NYSE- AMEX stock exchange and covers the 15year period starting from the 1st of January 1996 and ending on the 31st of December 2010. Bar-Yosef and Sarig's study was the primary source onto which this paper's methodology was based on.
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