Why does the price of a share tend to drop when it is marked ex dividend?
All things being equal, in theory the share price should drop by exactly the amount of the dividend declared. This is quite simply because, as at that date, sellers of the stock will still receive the dividend, but buyers will not as a result, the share price is marked down by the amount of the dividend to reflect this. Such a markdown does not always happen in practice because, for example, there may be positive news on the share that day which affects the share price and therefore hides the markdown. Also, when there are a number of FTSE100 companies going ex dividend on the same day, that will immediately have an impact on marking the level of the index down, in the same way as for individual shares.
