Changes in the Composition of Publicly Traded Firms: Implications for the Dividend-Price Ratio and Return Predictability

Stephan Jank ()
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Stephan Jank: Finance Department, Frankfurt School of Finance and Management, 60314 Frankfurt am Main, Germany; and Centre for Financial Research (CFR), 50923 Cologne, Germany

Management Science, 2015, vol. 61, issue 6, 1362-1377

Abstract: This paper documents how the changing composition of U.S. publicly traded firms has prompted a decline in the long-run mean of the aggregate dividend-price ratio, most notably since the 1970s. Adjusting the dividend-price ratio for such changes resolves several issues with respect to the predictability of stock market returns: the adjusted dividend-price ratio is less persistent, in-sample evidence for predictability is more pronounced, there is greater parameter stability in the predictive regression (particularly during the 1990s), and there is evidence of out-of-sample predictability.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1883 . This paper was accepted by Itay Goldstein, finance .

Keywords: return predictability; dividend-price ratio; sample selection (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:61:y:2015:i:6:p:1362-1377

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