The Predictive Ability of Dividend and Earnings Yields for Long-Term Stock Returns

Chunchi Wu and Xu-Ming Wang

The Financial Review, 2000, vol. 35, issue 2, 97-123

Abstract: We use empirical models to examine the predictive ability of dividend and earnings yields for long-term stock returns. Results show that dividend and earnings yields share a similar predictive power for future stock returns and growth. We find that the predictive power of dividend yields increases with the return horizon, but that yields forecast future returns and growth over a much longer horizon. Finally, dividend and earnings yields exhibit high autocorrelation and strong contemporaneous relations. Copyright 2000 by MIT Press.

Date: 2000
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