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A Longer Look at Dividend Yields

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  • Philippe Jorion

    () (General)

  • William N. Goetzmann

    () (Yale University, School of Management)

Abstract

This article re-examines the evidence on the ability of dividend yields to predict long-horizon stock returns. We use two new series beginning in 1871, a monthly series for the United States, and an annual series for the United Kingdom. Conditional on survival over the entire 122 years, dividend yields display only marginal ability to predict stock market returns in either country. We also argue that tests over long periods may be affected by survivorship. Simulations show that regression statistics based on a sample drawn solely from surviving markets can be seriously biased towards finding predictability.

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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm41.

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Date of creation: 25 Aug 1998
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Handle: RePEc:ysm:somwrk:ysm41

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Cited by:
  1. William Goetzmann & Philippe Jorion, 1998. "Re-emerging Markets," Yale School of Management Working Papers ysm50, Yale School of Management, revised 01 Aug 2000.
  2. Lutz Kilian & Silvia Goncalves, 2002. "Bootstrapping autoregressions with conditional heteroskedasticity of unknown form," Working Paper Series 196, European Central Bank.
  3. Shmuel Kandel & Robert F. Stambaugh, 1995. "On the Predictability of Stock Returns: An Asset-Allocation Perspective," NBER Working Papers 4997, National Bureau of Economic Research, Inc.
  4. Antje Henne & Sebastian Ostrowski & Peter Reichling, 2007. "Dividend Yield and Stability versus Performance at the German Stock Market," FEMM Working Papers 07017, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  5. Greg Filbeck & Sue Visscher, 1997. "Dividend yield strategies in the British stock market," European Journal of Finance, Taylor and Francis Journals, vol. 3(4), pages 277-289.
  6. William Goetzmann & Philippe Jorion, 1997. "A Century of Global Stock Markets," Yale School of Management Working Papers ysm53, Yale School of Management, revised 01 Aug 2000.
  7. Andrew Ang & Geert Bekaert, 2001. "Stock Return Predictability: Is it There?," NBER Working Papers 8207, National Bureau of Economic Research, Inc.
  8. Inoue, Atsushi & Kilian, Lutz, 2002. "In-Sample or Out-of-Sample Tests of Predictability: Which One Should We Use?," CEPR Discussion Papers 3671, C.E.P.R. Discussion Papers.
  9. Antje Henne & Sebastian Ostrowski & Peter Reichling, 2009. "Dividend yield and stability versus performance on the German stock market: a descriptive study," Review of Managerial Science, Springer, vol. 3(3), pages 225-248, November.
  10. Samih Antoine Azar, 2004. "Excess volatility in the US stock market: evidence to the contrary," Applied Financial Economics, Taylor and Francis Journals, vol. 14(18), pages 1307-1311.
  11. J. Annaert & W. Van Hyfte, 2006. "Long-Horizon Mean Reversion for the Brussels Stock Exchange: Evidence for the 19th Century," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/376, Ghent University, Faculty of Economics and Business Administration.

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