Dividend-Timing Strategy and Its Risk-Return Performance: Evidence from the Indonesian Stock Market

Research Aims: This study aims to examine the effectiveness of the dividend-timing model as an investment strategy across different buy-and-sell windows, and to compare its returns and risks with the IDX Composite during dividend events. Design/methodology/approach: The study applies an event study method focusing on dividend distribution events, tested through mean difference analysis. The strategy used in this model is to buy shares on the cum-dividend date and sell them on the ex-dividend date. The variations in buy-sell timing are referred to as horizons. In this study, seven horizons are set, with selling points ranging from the opening price on the ex-dividend date to the closing price five days after the ex-dividend date. This design allows the study to illustrate more clearly the differences in return and risk performance across various time frames following dividend distribution. Research Findings: The findings show that the dividend-timing model consistently generates positive returns across different horizons and outperforms the IDX Composite, which recorded negative returns during dividend events. In addition, the model carries lower risk. These results confirm that the dividend-timing model can provide stable returns while minimizing risks associated with market volatility. Theoretical Contribution/Originality: This study extends the literature on dividend-based investment strategies by providing empirical evidence from the Indonesian capital market. The novelty of this research lies in its focus on risk-adjusted performance and its proof that the dividend-timing model is not only profitable but also efficient in managing risks compared to the broader market index. Keywords: Cum-Dividend Date, Dividend-Timing Model, Ex-Dividend Date, Investment Risk, Stock Return