Changes in the composition of publicly traded firms: Implications for the dividend-price ratio and return predictability

Stephan Jank

No 12-08, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: This article 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.

Keywords: return predictability; dividend-price ratio; payout policy; sample selection; choice of organizational structure (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 G35 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-for
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1208

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