Dividend Momentum And Stock Return Predictability
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Dividend Momentum And Stock Return Predictability
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Author : Juan Antolín-Díaz
language : en
Publisher:
Release Date : 2021
Dividend Momentum And Stock Return Predictability written by Juan Antolín-Díaz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Autoregression (Statistics) categories.
A long tradition in macro-finance studies the joint dynamics of aggregate stock returns and dividends using vector autoregressions (VARs), imposing the cross-equation restrictions implied by the Campbell-Shiller (CS) identity to sharpen inference. We take a Bayesian perspective and develop methods to draw from any posterior distribution of a VAR that encodes a priori skepticism about large amounts of return predictability while imposing the CS restrictions. In doing so, we show how a common empirical practice of omitting dividend growth from the system amounts to imposing the extra restriction that dividend growth is not persistent. We highlight that persistence in dividend growth induces a previously overlooked channel for return predictability, which we label "dividend momentum." Compared to estimation based on OLS, our restricted informative prior leads to a much more moderate, but still significant, degree of return predictability, with forecasts that are helpful out-of-sample and realistic asset allocation prescriptions with Sharpe ratios that out-perform common benchmarks.
Time Varying Predictability For Stock Returns Dividend Growth And Consumption Growth
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Author : David G. McMillan
language : en
Publisher:
Release Date : 2014
Time Varying Predictability For Stock Returns Dividend Growth And Consumption Growth written by David G. McMillan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Using a state-space model, this paper examines time-variation in the predictive regressions for stock returns, dividend growth and consumption growth. Moreover, we linked time-variation explicitly to movements in economic factors that can account for risk and cash flow. Results support the view that stock return predictability is enhanced when risk is high (negative growth, higher volatility and positive growth/return covariance). In contrast, dividend growth and consumption growth predictability is enhanced during economic expansions. These results are supported by sub-sample analysis and a VAR approach. Furthermore, these latter exercises may uncover differences in the stock return predictability relationship when viewed over different time horizons. Overall, the paper contributes to the literature by highlighting the different nature of returns predictability, which arises largely through the risk channel and dividend and consumption growth predictability, which arise through the cash flow channel.
Stock Return Dividend Growth And Consumption Growth Predictability Across Markets And Time
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Author : David G. McMillan
language : en
Publisher:
Release Date : 2014
Stock Return Dividend Growth And Consumption Growth Predictability Across Markets And Time written by David G. McMillan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This paper links variation in the predictive regressions for stock returns, dividend growth and consumption growth to economic and market factors. The nature of these links can reveal whether movement in asset prices occurs primarily through the discount rate (risk-free rate or risk premium) or cash flow (economic conditions) channel, while they also help explain the mixed results for predictability reported in the literature. Variation is examined through cross-sectional regressions across fifteen markets and over time using rolling regressions. The cross-sectional and time-varying parameters are regressed against output growth, interest rates and inflation as well as market variables using fixed effects panel as well as both OLS and logit approaches. Panel and time-series predictive regressions based on two approaches that seek to identify periods of high expected returns (high risk premium) are also considered. The key implication for asset pricing is that although movement occurs through both channels, stock return predictability is more dominated by the discount rate channel and consumption growth predictability more so by the cash flow channel. Intuitively, such a difference may arise as investors and households rebalance their asset holdings and consumption at different speeds. There is also some evidence of money illusion through the inflation variable.
On The Predictability Of Stock Returns
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Author : Jin Zhang
language : en
Publisher:
Release Date : 2002
On The Predictability Of Stock Returns written by Jin Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Dividends categories.
Dividend Yields Dividend Growth And Return Predictability In The Cross Section Of Stocks
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Author : Paulo F. Maio
language : en
Publisher:
Release Date : 2015
Dividend Yields Dividend Growth And Return Predictability In The Cross Section Of Stocks written by Paulo F. Maio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
There is a generalized conviction that variation in dividend yields is exclusively related to expected returns and not to expected dividend growth - e.g. Cochrane's presidential address (Cochrane (2011)). We show that this pattern, although valid for the aggregate stock market, is not true for portfolios of small and value stocks, where dividend yields are related mainly to future dividend changes. Thus, the variance decomposition associated with aggregate dividend yield has important heterogeneity in the cross-section of equities. Our results are robust to different forecasting horizons, econometric methodology used (long-horizon regressions or first-order VAR), and an alternative decomposition based on excess returns.
Dividend Growth And Return Predictability
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Author : Gertjan Verdickt
language : en
Publisher:
Release Date : 2019
Dividend Growth And Return Predictability written by Gertjan Verdickt and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
We re-examine dividend growth and return predictability evidence using 165 years of data from the Brussels Stock Exchange. The conventional wisdom holds that time-varying dividend yield is predominately explained by changes in expected returns and that expected dividend growth is only weakly forecastable. However, we find robust dividend growth predictability evidence in every time period. A lack of dividend smoothing is the most important reason for the disconnect with previous evidence. Furthermore, we find return predictability in the post-World War II period when we adjust the dividend yields for changing index composition, business cycle variation and structural breaks. This is explained by a simultaneous increase in equity duration, induced by an increasing importance of growth stocks.
Stock Return And Dividend Growth Predictability Across The Business Cycle
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Author : Stig Vinther Møller
language : en
Publisher:
Release Date : 2015
Stock Return And Dividend Growth Predictability Across The Business Cycle written by Stig Vinther Møller and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
This paper develops an extension of Cochrane's (2008) joint hypothesis framework by allowing the coefficients to depend on the state of the economy. For recessions the results are clear-cut. Dividend yields vary entirely due to return predictability. However, in expansions, the "dog that did not bark" effect is present with respect to both return and dividend growth predictability. Dividend yields vary much less during stable periods of economic booms and returns and dividend growth seem only weakly predictable.
Four Centuries Of Return Predictability
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Author : Benjamin Golez
language : en
Publisher:
Release Date : 2014
Four Centuries Of Return Predictability written by Benjamin Golez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with Cash flow categories.
We combine annual stock market data for the most important equity markets of the last four centuries: the Netherlands/U.K. (1629-1812), U.K. (1813-1870) and U.S. (1871-2015). We show that dividend yields are stationary and consistently forecast returns. The documented predictability holds for annual and multi-annual horizons and works both in and out-of-sample, providing strong evidence that expected returns in stock markets are time-varying. Much of this variation is related to the business cycle, with expected returns increasing in recessions. We also find that, except for the period after 1945, dividend yields predict dividend growth rates.
Financial Markets And The Real Economy
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Author : John H. Cochrane
language : en
Publisher: Now Publishers Inc
Release Date : 2005
Financial Markets And The Real Economy written by John H. Cochrane and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Business & Economics categories.
Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Predicting The Equity Premium With Dividend Ratios
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Author : Amit Goyal
language : en
Publisher:
Release Date : 2002
Predicting The Equity Premium With Dividend Ratios written by Amit Goyal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Dividends categories.
Our paper reexamines the forecasting regressions which predict annual aggregate stock market returns net of the risk-free rate with lagged aggregate dividend-yield ratios and dividend-price ratios. Prior to 1990, the conditional dividend yield could reliably outperform the historical equity premium mean in predicting future equity premia in-sample . But our paper shows that the dividend ratios could not outperform the prevailing unconditional mean out-of-sample , plus any residual power was directly related to only two years, 1974 and 1975. As of 2000, even this in-sample predictive ability has disappeared. Our paper also documents changes in the time-series processes of the dividends themselves and shows that an increasing persistence of dividend-price ratio is largely responsible for weak stock return predictability
