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An empirical examination of the price-dividend relation with dividend management

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  • Lucy F. Ackert
  • William C. Hunter

Abstract

Some recent empirical evidence suggests that stock prices are not properly modelled as the present discounted value of expected dividends. In this paper we estimate a present value model of stock price that is capable of explaining the observed long-term trends in stock prices. The model recognizes that firm managers control cash dividend payments. The model estimates indicate that stock price movements may be explained by managerial behavior.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-00-22.

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Date of creation: 2000
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Handle: RePEc:fip:fedhwp:wp-00-22

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Keywords: Stocks ; Stock market;

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References

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Cited by:
  1. Pan, Ming-Shiun, 2007. "Permanent and transitory components of earnings, dividends, and stock prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(4), pages 535-549, September.
  2. Jakob B Madsen & Costas Milas, 2005. "The price-dividend relationship in inflationary and deflationary regimes," Keele Economics Research Papers KERP 2005/09, Centre for Economic Research, Keele University.
  3. William C. Hunter & Lucy F. Ackert, 1999. "Intrinsic Bubbles: The Case of Stock Prices: Comment," American Economic Review, American Economic Association, vol. 89(5), pages 1372-1376, December.
  4. Anne Vila Wetherilt & Simon Wells, 2004. "Long-horizon equity return predictability: some new evidence for the United Kingdom," Bank of England working papers 244, Bank of England.
  5. Angela Black & Patricia Fraser & Nicolaas Groenewold, 2001. "How Big is the Speculative Component in Australian Share Prices?," Economics Discussion / Working Papers 01-14, The University of Western Australia, Department of Economics.

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