Quote:
Originally Posted by knightofdelta
I would like you to shed more light. One the reasons I posted it is for constructive criticism so I can be better.
The reason I used coefficient of variation is that the five banks are going to be in a portfolio and large variability (positive and negative) can distort mean returns because the dividends are going to be part of the expected returns from the portfolio.
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I like the concept of coefficient of variation which you used. That was very novel. However, it's use with absolute values is what I query. I have no problems with the dividend yield illustration.
Let's take, for example, Skye Bank. Let's assume that there is a 1:2 reconstruction before ex-div date (but total dividend pay-out remains the same, in which case each reconstructed share gets N1.20 dividend). This will automatically put Skye in the top 5 in terms of absolute DPS and coefficient of variation of the top 5 banks will reduce. As we know, from a quantitative view-point, a reconstruction in itself should not change a stock's relative value, however, it does as explained above. If on the other hand the dividend yield was used, then the CoV would remain unchanged irrespective of the reconstruction.