On the reversal of return and dividend growth predictability: A tale of two periods

Long Chen ()

Journal of Financial Economics, 2009, vol. 92, issue 1, 128-151

Abstract: A disconcerting, albeit generally accepted, finding is that aggregate stock returns are predictable by dividend yield but dividend growth is unpredictable. I show that part of this lack of dividend growth predictability stems from how dividend growth is constructed. I then show a dramatic reversal of predictability in the 134 years during 1872-2005: stock returns are largely unpredictable in the first seven decades, but become predictable in the postwar period; dividend growth is strongly predictable in the prewar years but this predictability disappears in the postwar years. New evidence on the predictability of long-run returns and dividend growth is also shown.

Keywords: Dividend; price; ratio; Equity; return; Dividend; growth; Predictability; Reinvestment (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (86)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:92:y:2009:i:1:p:128-151

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