Predicting the Equity Premium with Dividend Ratios

Détails

ID Serval
serval:BIB_8B9BB7343FF3
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
Predicting the Equity Premium with Dividend Ratios
Périodique
Management Science
Auteur⸱e⸱s
Goyal  A., Welch  I.
ISSN
0025-1909
Statut éditorial
Publié
Date de publication
05/2003
Peer-reviewed
Oui
Volume
49
Numéro
5
Pages
639-654
Langue
anglais
Résumé
Our paper suggests a simple, recursive residuals (out-of-sample) graphical approach to evaluating the predictive power of popular equity premium and stock market time-series forecasting regressions.. When applied, we find that dividend ratios should have been known to have no predictive ability even prior to the 1990s, and that any seeming ability even then was driven by only two years, 1973 and 1974. 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 the inability of dividend ratios to predict equity premia. Cochrane's (1997) accounting identity-that dividend ratios have to predict long-run dividend growth or stock returns-empirically holds only over horizons longer than 5-10 years. Over shorter horizons, dividend yields primarily forecast themselves.
Mots-clé
Equity premium, stock returns, dividend yield, out-of-sample prediction
Web of science
Création de la notice
07/07/2009 14:56
Dernière modification de la notice
20/08/2019 15:50
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