Dividend growth predictability and the price-dividend ratio
Asymptotic tests over-reject the null of no predictability in present-value models. We develop a nonparametric testing approach in state space models, implying reliable finite sample inference under weak assumptions on price-dividend ratio and dividend shocks. We find sharp evidence of return predic...
| Main Authors: | , |
|---|---|
| Format: | Journal article |
| Published: |
INFORMS
2019
|
| _version_ | 1797100938715987968 |
|---|---|
| author | Piatti, I Trojani, F |
| author_facet | Piatti, I Trojani, F |
| author_sort | Piatti, I |
| collection | OXFORD |
| description | Asymptotic tests over-reject the null of no predictability in present-value models. We develop a nonparametric testing approach in state space models, implying reliable finite sample inference under weak assumptions on price-dividend ratio and dividend shocks. We find sharp evidence of return predictability in postwar US data, but a less consistent evidence of dividend predictability, which is significant only using cash-flow proxies reflecting information from mergers and acquisitions. These findings reconcile the diverging conclusions of present-value models and common predictive regressions, in a way that is robust to the choice of the predictive variables, the sample period and alternative cash-flow proxies. |
| first_indexed | 2024-03-07T05:44:49Z |
| format | Journal article |
| id | oxford-uuid:e6df13ff-784a-4aed-8962-aee6131a3378 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T05:44:49Z |
| publishDate | 2019 |
| publisher | INFORMS |
| record_format | dspace |
| spelling | oxford-uuid:e6df13ff-784a-4aed-8962-aee6131a33782022-03-27T10:34:04ZDividend growth predictability and the price-dividend ratioJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:e6df13ff-784a-4aed-8962-aee6131a3378Symplectic Elements at OxfordINFORMS2019Piatti, ITrojani, FAsymptotic tests over-reject the null of no predictability in present-value models. We develop a nonparametric testing approach in state space models, implying reliable finite sample inference under weak assumptions on price-dividend ratio and dividend shocks. We find sharp evidence of return predictability in postwar US data, but a less consistent evidence of dividend predictability, which is significant only using cash-flow proxies reflecting information from mergers and acquisitions. These findings reconcile the diverging conclusions of present-value models and common predictive regressions, in a way that is robust to the choice of the predictive variables, the sample period and alternative cash-flow proxies. |
| spellingShingle | Piatti, I Trojani, F Dividend growth predictability and the price-dividend ratio |
| title | Dividend growth predictability and the price-dividend ratio |
| title_full | Dividend growth predictability and the price-dividend ratio |
| title_fullStr | Dividend growth predictability and the price-dividend ratio |
| title_full_unstemmed | Dividend growth predictability and the price-dividend ratio |
| title_short | Dividend growth predictability and the price-dividend ratio |
| title_sort | dividend growth predictability and the price dividend ratio |
| work_keys_str_mv | AT piattii dividendgrowthpredictabilityandthepricedividendratio AT trojanif dividendgrowthpredictabilityandthepricedividendratio |