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Demographic Trends, the Dividend-Price Ratio, and the Predictability of Long-Run Stock Market Returns
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Favero, Carlo A., Gozluklu, Arie E. and Tamoni, Andrea (2011) Demographic Trends, the Dividend-Price Ratio, and the Predictability of Long-Run Stock Market Returns. Journal of Financial and Quantitative Analysis, Vol.46 (No.5). pp. 1493-1520. doi:10.1017/S0022109011000329 ISSN 0022-1090.
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Official URL: http://dx.doi.org/10.1017/S0022109011000329
Abstract
This paper documents the existence of a slowly evolving trend in the log dividend-price ratio, DPt, determined by a demographic variable, MYt: the middle-aged to young ratio. Deviations of DPt from this long-run component explain transitory but persistent fluctuations in stock market returns. The relation between MYt and DPt is a prediction of an overlapping generation model. The joint significance of MY and DPt in long-horizon forecasting regressions for market returns explains the mixed evidence on the ability of DPt to predict stock returns and provide a model-based interpretation of statistical corrections for breaks in the mean of this financial ratio.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HG Finance | ||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Journal or Publication Title: | Journal of Financial and Quantitative Analysis | ||||
Publisher: | Cambridge University Press | ||||
ISSN: | 0022-1090 | ||||
Official Date: | 2011 | ||||
Dates: |
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Volume: | Vol.46 | ||||
Number: | No.5 | ||||
Number of Pages: | 28 | ||||
Page Range: | pp. 1493-1520 | ||||
DOI: | 10.1017/S0022109011000329 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
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