The Price-Dividend Relationship in Inflationary and Deflationary Regimes

Jakob B. Madsen () and Costas Milas

No 03/05, City University Economics Discussion Papers from Department of Economics, City University, London

Abstract: This paper suggests that dividends do not reflect permanent earnings of corporations in periods of high inflation and deflation, and therefore the price-dividend relationship, as predicted by Gordon’s dividend-price model, breaks down. Using data for the US and the UK over the period from 1871 to 2002, nonlinear estimates support the prediction of the model.

Keywords: Regime-switching; nonlinearity; price-dividend relationship; inflation and deflation (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 G12 E44 (search for similar items in EconPapers)
Date: Written
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Related works:
Working Paper: The price-dividend relationship in inflationary and deflationary regimes (2005)
Working Paper: THE PRICE-DIVIDEND RELATIONSHIP IN INFLATIONARY AND DEFLATIONARY REGIMES (2005)
Journal Article: The price-dividend relationship in inflationary and deflationary regimes (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:cty:dpaper:0305

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