Stock price movements: Evidence from global equity markets

Chunhua Lan and Bao Doan

Journal of Empirical Finance, 2022, vol. 69, issue C, 123-143

Abstract: This paper studies how market-level stock price movements respond to changes in expected future aggregate cashflows versus discount rates in individual global equity markets. We find that market-level dividend yields have strong forecasting power for aggregate dividend growth over a short term in most stock markets but their forecasting power becomes weak with investment horizon; their forecasting power for returns tends to exhibit an opposite pattern. The variance decomposition of dividend yields exhibits interesting cross-country heterogeneity. We further find that dividend smoothing and country-level disclosure and investor protection are two important drivers of the diverse predictability patterns across countries.

Keywords: Stock price movements; Multiperiod dividend growth predictability; Multiperiod return predictability; Dividend smoothing; Disclosure and investor protection (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:69:y:2022:i:c:p:123-143

DOI: 10.1016/j.jempfin.2022.09.001

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