Download or read book Expected Returns and Expected Dividend Growth written by Martin Lettau and published by . This book was released on 2002 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate a consumption-based present value relation that is a function of future dividend growth. Using data on aggregate consumption and measures of the dividend payments from aggregate wealth, we show that changing forecasts of dividend growth make an important contribution to fluctuations in the U.S. stock market, despite the failure of the dividend-price ratio to uncover such variation. In addition, these dividend forecasts are found to covary with changing forecasts of excess stock returns. The variation in expected dividend growth we uncover is positively correlated with changing forecasts of excess returns and occurs at business cycle frequencies, those ranging from one to six years. Because positively correlated fluctuations in expected dividend growth and expected returns have offsetting affects on the log dividend-price ratio, the results imply that both the market risk-premium and expected dividend growth vary considerably more than what can be revealed using the log dividend-price ratio alone as a predictive variable.

Download or read book Expected Returns and Expected Dividend Growth written by Jun Ma and published by . This book was released on 2014 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines various state-space and VAR model specifications to investigate the contributions of expected returns and expected dividend growth to movements in the price-dividend ratio. We show that both models involve serious inference problems that need to be dealt with carefully. We propose procedures that offer more reliable inference results and the corrected inferences indicate that the aggregate data of dividends and returns alone do not provide strong enough evidence to support the notion that the expected returns dominate the stock price variation. However, we show that an alternative measure of cash flows termed the net payout by Larrain and Yogo (2008) appears to lend strong support to the notion that the expected cash flow explains a large fraction of the firm value variation. This finding remains robust in both state-space and VAR decompositions with the corrected inference.

Download or read book Expected Returns and Dividend Growth Rates Implied by Derivative Markets written by Benjamin Golez and published by . This book was released on 2015 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dividend-price ratio is a noisy proxy for expected returns when expected dividend growth is time-varying. This paper uses a new and forward-looking measure of dividend growth extracted from Samp;P 500 futures and options to correct the dividend-price ratio for changes in expected dividend growth. Over January 1994 through June 2011, dividend growth implied by derivative markets reliably forecast future dividend growth, and the corrected dividend-price ratio predicts Samp;P 500 returns substantially better than the standard dividend-price ratio, in-sample and out-of-sample. Time-varying expected dividend growth is important to explain price movements, especially because it is highly correlated with expected returns.

Download or read book Dividend Growth and Return Predictability written by Gertjan Verdickt and published by . This book was released on 2019 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: We re-examine dividend growth and return predictability evidence using 165 years of data from the Brussels Stock Exchange. The conventional wisdom holds that time-varying dividend yield is predominately explained by changes in expected returns and that expected dividend growth is only weakly forecastable. However, we find robust dividend growth predictability evidence in every time period. A lack of dividend smoothing is the most important reason for the disconnect with previous evidence. Furthermore, we find return predictability in the post-World War II period when we adjust the dividend yields for changing index composition, business cycle variation and structural breaks. This is explained by a simultaneous increase in equity duration, induced by an increasing importance of growth stocks.

Download or read book Dividend Yields Dividend Growth and Return Predictability in the Cross Section of Stocks written by Paulo F. Maio and published by . This book was released on 2015 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is a generalized conviction that variation in dividend yields is exclusively related to expected returns and not to expected dividend growth - e.g. Cochrane's presidential address (Cochrane (2011)). We show that this pattern, although valid for the aggregate stock market, is not true for portfolios of small and value stocks, where dividend yields are related mainly to future dividend changes. Thus, the variance decomposition associated with aggregate dividend yield has important heterogeneity in the cross-section of equities. Our results are robust to different forecasting horizons, econometric methodology used (long-horizon regressions or first-order VAR), and an alternative decomposition based on excess returns.

Download or read book Stock Market Equilibrium and the Dividend Yield written by Mr.Charles Frederick Kramer and published by International Monetary Fund. This book was released on 1996-08-01 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Can fundamentals account for the recent performance of the U.S. stock market? The price/earnings ratio is out of line with historical averages, and the dividend/price ratio has recently reached a historic low. These developments and record levels of inflows into mutual funds have led some to conclude that stock prices are above their fundamental levels. This paper assesses the recent rise in the stock market using a model for the equilibrium dividend/price ratio. While economic variables can account for most of the recent fall in the dividend/price ratio, mutual-fund inflows still have some marginal explanatory power.

Download or read book On the Relation Between the Persistence and Predictability of Dividend Growth Rates written by Jan Schneider and published by . This book was released on 2013 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: All variations in price-dividend ratios result from either movements in expected returns or expected dividend growth rates. If growth rates contain a persistent component, even small changes in expected near-term dividends can cause large movements in prices. I derive closed-form solutions for the relation between the persistency of dividend growth rates and the ability of price-dividend ratios to forecast future dividends. For a constant risk premium, it is possible to match the low predictability of near-term dividends by choosing a sufficiently long half-life of news, however, this long half-life implies a counterfactual high degree of predictability for long-term dividend growth rates.

Download or read book Predictive regressions a present value approach written by Jules H. van Binsbergen and published by . This book was released on 2010 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a latent variables approach within a present-value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the history of price-dividend ratios and dividend growth rates to predict future returns and dividend growth rates. We find that returns and dividend growth rates are predictable with R-squared values ranging from 8.2% to 8.9% for returns and 13.9% to 31.6% for dividend growth rates. Both expected returns and expected dividend growth rates have a persistent component, but expected returns are more persistent than expected dividend growth rates.

Download or read book Growth Expectations Dividend Yields and Future Stock Returns written by Zhi Da and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: According to the dynamic version of the Gordon growth model, the long-run expected return on stocks, stock yield, is the sum of the dividend yield on stocks plus some weighted average of expected future growth rates in dividends. We construct a measure of stock yield based on sell-side analysts' near-term earnings forecasts that predicts US stock index returns well, with an out-of-sample R-squared that is consistently above 2% at monthly frequency over our sample period. Stock yield also predicts future stock index returns in the US and other G7 countries and returns of US stock portfolios formed by sorting stocks based on firm characteristics, at various horizons. The findings are consistent with a single dominant factor driving expected returns on stocks over different holding periods. That single factor extracted from the cross section of stock yields using the Kelly and Pruitt (2013) partial regressions method predicts stock index returns better. The performance of the Binsbergen and Koijen (2010) latent factor model for forecasting stock returns improves significantly when stock yield is included as an imperfect observation of expected return on stocks. Consistent with folk wisdom, stock returns are more predictable coming out of a recession. Our measure performs as well in predicting stock returns as the implied cost of capital, another common stock yield measure that uses additional information.

Download or read book Evaluating Predictors Within a Present value Framework written by Jhe Yun and published by . This book was released on 2012 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: I impose functional-form restrictions on the time-series processes of expected returns and expected dividend growth rates to better estimate them in a small sample. The approach helps to aggregate information contained in the entire history of prices, dividend growth, and additional predictors without parameter proliferation. I find that both expected returns and expected dividend growth rates are substantially time-varying, positively correlated with each other, and covary with several macroeconomic variables. The estimated expectations of returns and dividend growth rates are strong predictors of realized returns and dividend growth rates, respectively, both in-sample and out-of-sample. Book-to-Market Ratio, Stock Variance, Consumption-Wealth-Income Ratio, and BAA-rated Corporate Bond Yield significantly improve the return and dividend forecasts of my present-value model.

Download or read book Dividend Dynamics Learning and Expected Stock Index Returns written by Ravi Jagannathan and published by . This book was released on 2015 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model for dividend dynamics and allow investors to learn about model parameters over time. The model predicts 31.3% of the variation in annual dividend growth rates during 1976-2013. When investors' beliefs about the persistence of dividend growth rates increase, dividend-to-price ratios increase, and short-horizon expected returns decrease after controlling for dividend-to-price ratios. These findings are consistent with investors' preferences for early resolution of uncertainty. We embed learning about dividend dynamics in an equilibrium asset pricing model. The model predicts 22.8% of the variation in annual stock index returns. Learning accounts for forty-percent of that 22.8%.

Download or read book The Predictive Power of the Dividend Risk Premium written by Davide E. Avino and published by . This book was released on 2019 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that the dividend growth rate implied by the options market is informative about (i) the expected dividend growth rate and (ii) the expected dividend risk premium. We model the expected dividend risk premium and explore its implications for the predictability of dividend growth and stock market returns. Correcting for the expected dividend risk premium strengthens the evidence of dividend growth and stock market return predictability both in- and out-of-sample. Economically, a market timing investor who accounts for the time varying expected dividend risk premium realizes an additional utility gain of 2.02 % per year.

Download or read book Global Stock Markets written by Wolfgang Drobetz and published by Springer Science & Business Media. This book was released on 2013-06-29 with total page 346 pages. Available in PDF, EPUB and Kindle. Book excerpt: Wolfgang Drobetz provides empirical evidence on the time variation of expected stock returns over the stages of the business cycle.

Download or read book Dividend Growth Investing written by Clara Robinson and published by Creek Ridge Publishing. This book was released on 2024-04-03 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unlock the power of dividend growth investing for a lifetime of wealth! Are you ready to take control of your financial future? Imagine a world where your investments work tirelessly for you, generating a steady flow of income and growing your wealth, even while you sleep. With the volatility of markets and the unpredictability of economies, securing your financial independence has never been more important. It’s not a question of if, but when you’ll need the resilience and stability that only a well-structured dividend growth investment strategy can provide. Here's a taste of what you can find inside: Unwavering Stability - Explore the unmatched potential of dividend aristocrats and how they anchor your portfolio in every market condition. Crystal-Clear Strategy - Gain precise, actionable guidance that demystifies the process of selecting and investing in top-performing dividend stocks. Financial Empowerment - Break free from financial uncertainties with robust strategies that ensure a growing income stream. Comprehensive Wealth Building - From foundational principles to advanced portfolio management, get equipped with everything you need for financial success. Skill Enhancement - Master the art of identifying and capitalizing on dividend growth opportunities to maximize your investment returns. Peace of Mind - Secure your financial future with strategies that protect and grow your wealth, no matter the economic climate. Simplified Success - A step-by-step guide that transforms complex investment concepts into a straightforward path to wealth accumulation. Envision Your Financial Transformation - Imagine achieving financial freedom and providing for your loved ones with ease. This book is the key to unlocking that reality, guiding you through the turbulent waters of investing with confidence and expertise.

Download or read book Dividend Growth Investing written by Joey Thompson and published by Novelty Publishing LLC. This book was released on 2021-03-06 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt: Uncover the secret to building a passive income stream and find your path to financial freedom and early retirement through the stock market with the definitive guide to dividend growth investing Do you want to get started with investing and better understand how to make money investing in stocks, but have no idea where to begin? Have you ever tried other investment strategies that not only failed to make you money, but burned a hole in your pocket? Do you want to discover an investment strategy that offers reliable income over a long period of time? In this guide, Joey Thompson shows you how to analyze companies and hands you to powerful stock-picking strategies to achieve predictable returns on your investment over time and grow your wealth, as well as avoiding deadly investing mistakes that most investors make. Here's a small sample of what you're going to learn in Dividend Growth Investing: ● All you need to know about dividend investing and how it really works ● A glossary of all the important terms you absolutely need to know about before getting into dividend investing ● A powerful investment plan that automatically reinvests the income generated from your dividend investments ● Crucial factors that influence dividend payout for companies you need to be aware of ● High performing dividend stocks and how to choose one that is perfect for your needs ● Pitfalls and risks associated with dividend growth investing that "gurus" and financial experts are unwilling to tell you about ● How to mitigate these risks with proven investment strategies ● Steps to help you build your early retirement portfolio and create a long-term income stream ● How to take advantage of tax benefits from dividend investments ● The six absolute commandments of dividend investing ● ...and much, much more! Whether you're a complete beginner to the stock market and have no idea how it works, or you're a seasoned investor looking for proven ways to consistently make profits off dividend growth investing, the insights and practical advice contained in this guide will help you build wealth and improve investment returns.

Download or read book Stock Return Variation and Expected Dividends written by Peter Andrew Hecht and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Kothari and Shanken (1992) argue that stock return variation can, to a large extent, be explained by rational revisions of future dividend expectations. Kothari and Shanken arrive at this conclusion based on the explanatory power of a regression of returns on lagged dividend yield, contemporaneous and future dividend growth rates, and future returns. This regression nests a truncated, first order approximation of the definition of return. Hence, the explanatory power is high by construction and has only minimal economic interpretations. Our reinterpretation has implications for other studies that use future variables to explain past returns. The explanatory variables are difficult to interpret, and these models may misidentify the main source of return variation. By decomposing the regressions, we clarify the roles of the explanatory variables.

Download or read book Price Dividend Ratio and Long run Stock Returns a Score Driven State Space Model written by Davide Delle Monache and published by . This book was released on 2019 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we develop a general framework to analyze state space models with time-varying system matrices, where time variation is driven by the score of the conditional likelihood. We derive a new filter that allows for the simultaneous estimation of the state vector and of the time-varying matrices. We use this method to study the time-varying relationship between the price dividend ratio, expected stock returns and expected dividend growth in the US since 1880. We find a significant increase in the long-run equilibrium value of the price dividend ratio over time, associated with a fall in the long-run expected rate of return on stocks. The latter can be attributed mainly to a decrease in the natural rate of interest, as the long-run risk premium has only slightly fallen.