Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?

Robert Shiller

No 456, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper will develop the efficient markets model in Section I to clarify some theoretical questions that may arise in connection with the inequality (1) and some similar inequalities will be derived that put limits on the standard deviation of the innovation in price and the standard deviation of the change in price. The model is restated in innovation form which allows better understanding of the limits on stock price volatility imposed by the model. In particular, this will enable us to see (Section II) that the standard deviation of p is highest when information about dividends is revealed smoothly and that if information is revealed in big lumps occasionally the price series may have higher kurtosis (fatter tails) but will have lower variance. The notion expressed by some that earnings rather than dividend data should be used is discussed in Section III, and a way of assessing the importance of time variation in real discount rates is shown in Section IV. The inequalities are compared with the data in Section V.

Date: 1980-02
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (308)

Published as Shiller, Robert J. "Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends? The American Economic Review, Vol. 71, No. 3, (June 1981), PP. 421-436.

Downloads: (external link)
http://www.nber.org/papers/w0456.pdf (application/pdf)

Related works:
Journal Article: Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends? (1981)
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:nbr:nberwo:0456

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w0456

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().