Predicting the Equity Premium with Dividend Ratios

Amit Goyal and Ivo Welch

Yale School of Management Working Papers from Yale School of Management

Abstract: Our paper suggests a simple recursive residuals (out-of-sample) graphical approach to evaluating the predictive power of popular equity premium and stock market time-series forecasting regressions. When applied, we find that dividend-ratios should have been known to have no predictive ability even prior to the 1990s, and that any seeming ability even then was driven by only two years, 1973 and 1974. Our paper also documents changes in the time-series processes of the dividends themselves and shows that an increasing persis-tence of dividend-price ratio is largely responsible for th

Date: 1999-04-01, Revised 2002-11-01
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Related works:
Journal Article: Predicting the Equity Premium with Dividend Ratios (2003)
Working Paper: Predicting the Equity Premium With Dividend Ratios (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:wpaper:amz2437

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