We provide evidence that firms with weak investment opportunities (those whose current earnings justify a greater valuation than firms with strong investment opportunities) signal their permanent earnings level through their dividends. In the cross-section, we show that both dividend levels and...

We provide the first large-scale study of the performance of expected-return proxies (ERPs) internationally. Analyst-forecast-based ICCs are sparsely populated and not robustly associated with future returns. Earnings-model-forecast-based ICCs are well-populated, but are unreliable outside the...

This paper examines prediction errors in the general dividend discount model using a back-test method. The prediction errors are based on realized dividends, terminal stock prices, and estimates of time-varying discount rates. Models of varying lengths are examined in our tests. We include firms...