EconPapers    
Economics at your fingertips  
 

The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors

Robert Shiller () and John Campbell ()

No 812, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: A linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates. This relation can be tested using vector autoregressive methods. Three versions of the linearized model, differing in the measure of discount rates, are tested for United States time series 1981-1986: versions using real interest rate data. The results yield a metric to judge the relative importance of real dividend growth, measured real discount rates and unexplained factors in determining the dividend-price ratio.

Keywords: Dividend-Price ratio; rational expectations; present value; vector autoregression; dividends; stock prices; discount rate (search for similar items in EconPapers)
Date: 1986-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Published in Review of Financial Studies (Fall 1988), 1: 195-228; also in Andrew W. Lo (ed.), Market Efficiency: Stock Market Behavior in Theory and Practice, Edward Elgar, 1996

Downloads: (external link)
http://cowles.yale.edu/sites/default/files/files/pub/d08/d0812.pdf (application/pdf)

Related works:
Journal Article: The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors (1988) Downloads
Working Paper: The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors (1986) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:812

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Regan ().

 
Page updated 2019-10-07
Handle: RePEc:cwl:cwldpp:812