The stock price is reduced by the amount of a dividend on which date?

The correct answer is that the stock price is reduced by the amount of a dividend on the ex-dividend date. On this date, the stock begins trading without the value of the next dividend payment. The ex-dividend date is set by the stock exchange and typically occurs one business day before the record date.

On the ex-dividend date, buyers of the stock will no longer be entitled to receive the declared dividend; hence, the stock's price is adjusted downward to reflect the dividend that will not be paid to new purchasers. This price adjustment is a common market practice to ensure that only shareholders who owned the stock before the ex-dividend date will receive the dividend payment.

As for the other dates mentioned, the date of declaration is when the company announces the dividend, but no price adjustment occurs at that time. The payment date is simply when the dividend is distributed to stockholders; by this time, the stock price has already adjusted. The record date is the cutoff for determining which shareholders are entitled to receive the dividend, but again, there is no price adjustment on this date. The true impact on the stock price occurs at the beginning of trading on the ex-dividend date.