Sec. 18] THE RISK ELEMENT 287 
only a slight elevation — enough to represent the commercial 
value of the uncertain dividend. Then when the amount 
of the dividend is known, just before it is distributed, the 
stock (including the right to the impending dividend) 
will suddenly jump in value. After the dividend is paid, 
it will again descend and then increase slowly in value until 
the approach of the next dividend. This will explain the 
fact which has sometimes been observed, that the value 
of a dividend-paying stock often remains fairly constant. 
Normally its course will be somewhat as in Figure 12. 
The capital-value increases only slowly from 4 to B, when, 
with the declaration of a dividend, it immediately jumps 
to C, and with the distribution of the dividend at D 
oO 
oO 
© 
H 
   
Yh er ee 
Fic. 12. 
descends to E, and so on indefinitely. If we omit the 
fluctuations between the declarations of dividends and the 
distributions, the course of the stock remains relatively 
horizontal, as represented by 4B, EF, 1J. 
§ 14 
The introduction of the element of chance does not greatly 
affect bookkeeping except to impair somewhat the corre- 
spondence between capital accounts and income accounts. 
This is occasioned by mere changes in the size of the 
capital items. When revision of capital-value 1s due to a 
new estimate of future income, as after a fire, shipwreck, 
or other calamity, the immediate result is merely to reduce 
(or, it may be, to increase) the value of the assets. The 
accountant must “write down” (or up) the assets, and