Dividend Growth Predictability and the Price-Dividend Ratio

Piatti, Ilaria and Trojani, Fabio (2014) Dividend Growth Predictability and the Price-Dividend Ratio. Swiss Finance Institute Research Paper.

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Conventional tests of present-value models over-reject the null of no predictability. In order to better account for the intrinsic probability of detecting predictive relations by chance alone, we develop a new nonparametric Monte Carlo testing method, which does not rely on distributional assumptions to aggregate the information from the time series of price-dividend ratios and dividend growth. We find evidence of return predictability, but no apparent evidence of dividend growth predictability in postwar US data, thus reconciling the diverging conclusions in the literature. Our findings are robust to the specification of the predictive information set, the choice of the sample period and the use of different cash-flow proxies.

Item Type: Other Working Paper
Keywords: finance
Subject(s): Finance
Date Deposited: 26 Mar 2015 14:29
Last Modified: 11 Sep 2018 10:06
Funders: not applicable
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5268

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