The dividend yield ratio in the stock markets is, to an extent, comparable to the rent-price ratio in the housing market. Taking advantage of this definitional similarity, one can then use the traditional unit root test for log dividend yield – in this case, the log rent-price ratio – to...

Tests for unit roots in log dividend yields, which are consistent with ‘rational bubbles’ in stock prices, are conducted for the S&P500 and Finnish stock market indexes. In addition to the traditional unit root tests, we split the data into 10-year segments and use frequency domain analysis...