Stock return predictability and stationarity of dividend yield
AbstractThis paper first investigates the stationarity of dividend yield and then analyzes the predictive ability of the adjusted dividend yield which removes structural changes and high persistence characteristics. Empirical results have found that the dividend yield follows a mean-reverting process in each regime, and the convergence speed depends on the mean and variance. Moreover, the dividend yield is also global stationary. Finally, the adjusted dividend yield can predict future stock returns, and its predictive ability is time-invariant.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 1 ()
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mean reversion; regime switching; stationarity; stock return predictability;
Find related papers by JEL classification:
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- G1 - Financial Economics - - General Financial Markets
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