Predictive Regressions: A Present-Value Approach
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 <formula format="inline"><file name="jofi_1575_mu1.gif" type="gif" /></formula> 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. Copyright (c) 2010 the American Finance Association.
Year of publication: |
2010
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Authors: | BINSBERGEN, JULES H. van ; KOIJEN, RALPH S. J. |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 65.2010, 4, p. 1439-1471
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Publisher: |
American Finance Association - AFA |
Saved in:
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