Stock return predictability and stationarity of dividend yield

Kuang-Liang Chang ()
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Kuang-Liang Chang: Department of Applied Economics, National Chiayi University, Taiwan

Economics Bulletin, 2012, vol. 32, issue 1, 715-729

Abstract: This paper first investigates the stationarity of dividend yield and then analyzes the predictive ability of the adjusted dividend yield which removes structural changes and high persistence characteristics. Empirical results have found that the dividend yield follows a mean-reverting process in each regime, and the convergence speed depends on the mean and variance. Moreover, the dividend yield is also global stationary. Finally, the adjusted dividend yield can predict future stock returns, and its predictive ability is time-invariant.

Keywords: mean reversion; regime switching; stationarity; stock return predictability (search for similar items in EconPapers)
JEL-codes: C2 G1 (search for similar items in EconPapers)
Date: 2012-02-24
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