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Title: | Local Trends in Price-to-Dividend Ratios-Assessment, Predictive Value, and Determinants |
Authors: | HERWARTZ, HELMUT RENGEL, MALTE XU, FANG |
Keywords: | Price-to-dividend ratio;stock return prediction;consumption risk;dividend payments;demographics;nonlinear state space model |
Issue Date: | 2016 |
Publisher: | Wiley |
Citation: | Journal of Money, Credit and Banking, 2016, 48 (8), pp. 1655 - 1690 |
Abstract: | Persistent variations of the log price-to-dividend ratio (PD) and their economic determinants have attracted a lively discussion in the literature. We suggest a gradually time-varying state process to govern the persistence of the PD. The adopted state space approach offers favourable model diagnostics and finds particular support in out-of-sample stock return prediction. We show that this slowly evolving mean process is jointly shaped by the consumption risk, the demographic structure and the proportion of firms with traditional dividend payout policy during the past 60 years. In particular, the volatility of consumption growth plays the dominant role. |
URI: | http://bura.brunel.ac.uk/handle/2438/16493 |
DOI: | http://dx.doi.org/10.1111/jmcb.12370 |
ISSN: | 0022-2879 http://dx.doi.org/10.1111/jmcb.12370 |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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Fulltext.pdf | Available on 01/12/2018 | 289.36 kB | Adobe PDF | View/Open |
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