Expected Returns And Expected Dividend Growth
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Expected Returns And Expected Dividend Growth
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Author : Martin Lettau
language : en
Publisher:
Release Date : 2002
Expected Returns And Expected Dividend Growth written by Martin Lettau 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.
We investigate a consumption-based present value relation that is a function of future dividend growth. Using data on aggregate consumption and measures of the dividend payments from aggregate wealth, we show that changing forecasts of dividend growth make an important contribution to fluctuations in the U.S. stock market, despite the failure of the dividend-price ratio to uncover such variation. In addition, these dividend forecasts are found to covary with changing forecasts of excess stock returns. The variation in expected dividend growth we uncover is positively correlated with changing forecasts of excess returns and occurs at business cycle frequencies, those ranging from one to six years. Because positively correlated fluctuations in expected dividend growth and expected returns have offsetting affects on the log dividend-price ratio, the results imply that both the market risk-premium and expected dividend growth vary considerably more than what can be revealed using the log dividend-price ratio alone as a predictive variable.
Expected Returns And Expected Dividend Growth
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Author : Jun Ma
language : en
Publisher:
Release Date : 2014
Expected Returns And Expected Dividend Growth written by Jun Ma 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 examines various state-space and VAR model specifications to investigate the contributions of expected returns and expected dividend growth to movements in the price-dividend ratio. We show that both models involve serious inference problems that need to be dealt with carefully. We propose procedures that offer more reliable inference results and the corrected inferences indicate that the aggregate data of dividends and returns alone do not provide strong enough evidence to support the notion that the expected returns dominate the stock price variation. However, we show that an alternative measure of cash flows termed the net payout by Larrain and Yogo (2008) appears to lend strong support to the notion that the expected cash flow explains a large fraction of the firm value variation. This finding remains robust in both state-space and VAR decompositions with the corrected inference.
Expected Returns And Dividend Growth Rates Implied By Derivative Markets
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Author : Benjamin Golez
language : en
Publisher:
Release Date : 2015
Expected Returns And Dividend Growth Rates Implied By Derivative Markets 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 2015 with categories.
The dividend-price ratio is a noisy proxy for expected returns when expected dividend growth is time-varying. This paper uses a new and forward-looking measure of dividend growth extracted from Samp;P 500 futures and options to correct the dividend-price ratio for changes in expected dividend growth. Over January 1994 through June 2011, dividend growth implied by derivative markets reliably forecast future dividend growth, and the corrected dividend-price ratio predicts Samp;P 500 returns substantially better than the standard dividend-price ratio, in-sample and out-of-sample. Time-varying expected dividend growth is important to explain price movements, especially because it is highly correlated with expected returns.
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.
Stock Market Equilibrium And The Dividend Yield
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Author : Mr.Charles Frederick Kramer
language : en
Publisher: International Monetary Fund
Release Date : 1996-08-01
Stock Market Equilibrium And The Dividend Yield written by Mr.Charles Frederick Kramer and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996-08-01 with Business & Economics categories.
Can fundamentals account for the recent performance of the U.S. stock market? The price/earnings ratio is out of line with historical averages, and the dividend/price ratio has recently reached a historic low. These developments and record levels of inflows into mutual funds have led some to conclude that stock prices are above their fundamental levels. This paper assesses the recent rise in the stock market using a model for the equilibrium dividend/price ratio. While economic variables can account for most of the recent fall in the dividend/price ratio, mutual-fund inflows still have some marginal explanatory power.
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.
Growth Expectations Dividend Yields And Future Stock Returns
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Author : Zhi Da
language : en
Publisher:
Release Date : 2014
Growth Expectations Dividend Yields And Future Stock Returns written by Zhi Da and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with Dividends categories.
According to the dynamic version of the Gordon growth model, the long-run expected return on stocks, stock yield, is the sum of the dividend yield on stocks plus some weighted average of expected future growth rates in dividends. We construct a measure of stock yield based on sell-side analysts' near-term earnings forecasts that predicts US stock index returns well, with an out-of-sample R-squared that is consistently above 2% at monthly frequency over our sample period. Stock yield also predicts future stock index returns in the US and other G7 countries and returns of US stock portfolios formed by sorting stocks based on firm characteristics, at various horizons. The findings are consistent with a single dominant factor driving expected returns on stocks over different holding periods. That single factor extracted from the cross section of stock yields using the Kelly and Pruitt (2013) partial regressions method predicts stock index returns better. The performance of the Binsbergen and Koijen (2010) latent factor model for forecasting stock returns improves significantly when stock yield is included as an imperfect observation of expected return on stocks. Consistent with folk wisdom, stock returns are more predictable coming out of a recession. Our measure performs as well in predicting stock returns as the implied cost of capital, another common stock yield measure that uses additional information.
On The Relation Between The Persistence And Predictability Of Dividend Growth Rates
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Author : Jan Schneider
language : en
Publisher:
Release Date : 2013
On The Relation Between The Persistence And Predictability Of Dividend Growth Rates written by Jan Schneider and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
All variations in price-dividend ratios result from either movements in expected returns or expected dividend growth rates. If growth rates contain a persistent component, even small changes in expected near-term dividends can cause large movements in prices. I derive closed-form solutions for the relation between the persistency of dividend growth rates and the ability of price-dividend ratios to forecast future dividends. For a constant risk premium, it is possible to match the low predictability of near-term dividends by choosing a sufficiently long half-life of news, however, this long half-life implies a counterfactual high degree of predictability for long-term dividend growth rates.
Predictive Regressions A Present Value Approach
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Author : Jules H. van Binsbergen
language : en
Publisher:
Release Date : 2010
Predictive Regressions A Present Value Approach written by Jules H. van Binsbergen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Economics categories.
We propose a latent variables approach within a present-value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the history of price-dividend ratios and dividend growth rates to predict future returns and dividend growth rates. We find that returns and dividend growth rates are predictable with R-squared values ranging from 8.2% to 8.9% for returns and 13.9% to 31.6% for dividend growth rates. Both expected returns and expected dividend growth rates have a persistent component, but expected returns are more persistent than expected dividend growth rates.
Evaluating Predictors Within A Present Value Framework
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Author : Jhe Yun
language : en
Publisher:
Release Date : 2012
Evaluating Predictors Within A Present Value Framework written by Jhe Yun and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
I impose functional-form restrictions on the time-series processes of expected returns and expected dividend growth rates to better estimate them in a small sample. The approach helps to aggregate information contained in the entire history of prices, dividend growth, and additional predictors without parameter proliferation. I find that both expected returns and expected dividend growth rates are substantially time-varying, positively correlated with each other, and covary with several macroeconomic variables. The estimated expectations of returns and dividend growth rates are strong predictors of realized returns and dividend growth rates, respectively, both in-sample and out-of-sample. Book-to-Market Ratio, Stock Variance, Consumption-Wealth-Income Ratio, and BAA-rated Corporate Bond Yield significantly improve the return and dividend forecasts of my present-value model.