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Dividend Yields for Forecasting Stock Market Returns. An ARDL Cointegration Analysis for Germany

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  • Ansgar Belke

    (University of Hohenheim,Department of Economics, Stuttgart)

  • Thorsten Polleit

    (Barclays Capital and Business School of Finance & Management,Frankfurt)

Abstract

This paper empirically assesses the ability of dividend yields to predict future tock returns in Germany assuming efficient markets and rational expectations. Since the order of integration of repressors are not exactly known, a bound procedure, namely a n autoregressive distributed lag (ARDL) model, is applied to test for cointegrating relationships among future stock returns and today’s divided yields. It is also capable of dealing with the controversial issue of exogeneity of the dividend yield. ARDL and error-correction models are estimated for (future) stock returns and the dividend yield based on consistent estimates and standard normal asymptotic theory.

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Bibliographic Info

Article provided by Cyprus Economic Society and University of Cyprus in its journal Ekonomia.

Volume (Year): 9 (2006)
Issue (Month): 1 (Summer)
Pages: 86-116

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Handle: RePEc:ekn:ekonom:v:9:y:2006:i:1:p:86-116

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Web page: http://www.ekonomia.ucy.ac.cy/
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Cited by:
  1. Ansgar Belke, 2010. "Die Auswirkungen der Geldmenge und des Kreditvolumens auf die Immobilienpreise – Ein ARDL-Ansatz für Deutschland," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(2), pages 138-162.
  2. Ansgar Belke & Robert Czudaj, 2010. "Is Euro Area Money Demand (Still) Stable? – Cointegrated VAR versus Single Equation Techniques," Ruhr Economic Papers 0171, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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