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Stock Price Volatility, Ordinary Dividends, and Other Cash Flows to Shareholders

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  • Ackert, Lucy F
  • Smith, Brian F

Abstract

This paper shows that the results of variance-bound tests depend on how cash distributions to shareholders are measured. As in prior studies, the authors find apparent evidence of excess volatility when a narrow definition of cash flow (dividends only) is applied. However, they are unable to reject the hypothesis of market efficiency when the cash flow measure also includes share repurchases and takeover distributions in addition to ordinary cash dividends. Copyright 1993 by American Finance Association.

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  • Ackert, Lucy F & Smith, Brian F, 1993. " Stock Price Volatility, Ordinary Dividends, and Other Cash Flows to Shareholders," Journal of Finance, American Finance Association, vol. 48(4), pages 1147-1160, September.
    • Handle: RePEc:bla:jfinan:v:48:y:1993:i:4:p:1147-60
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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. Bansal, Ravi & Coleman, Wilbur John, II, 1996. "A Monetary Explanation of the Equity Premium, Term Premium, and Risk-Free Rate Puzzles," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1135-1171, December.
    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. Larrain, Borja & Yogo, Motohiro, 2008. "Does firm value move too much to be justified by subsequent changes in cash flow," Journal of Financial Economics, Elsevier, vol. 87(1), pages 200-226, January.
    5. Piergiorgio Alessandri & Donald Robertson & Stephen Wright, 2008. "Miller and Modigliani, Predictive Return Regressions and Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(2), pages 181-207, April.
    6. Black, Angela & Fraser, Patricia & Groenewold, Nicolaas, 2003. "U.S. stock prices and macroeconomic fundamentals," International Review of Economics & Finance, Elsevier, vol. 12(3), pages 345-367.
    7. Donald Robertson & Stephen Wright, 2006. "Dividends, Total Cash Flow to Shareholders, and Predictive Return Regressions," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 91-99, February.
    8. Lucy Ackert & William Hunter, 2001. "An Empirical Examination of the Price-Dividend Relation with Dividend Management," Journal of Financial Services Research, Springer;Western Finance Association, vol. 19(2), pages 115-129, April.
    9. Garrett H. TeSelle, 1998. "Bubbles or noise? Reconciling the results of broad-dividend variance-bounds tests," Finance and Economics Discussion Series 1998-42, Board of Governors of the Federal Reserve System (U.S.).
    10. Berneburg, Marian, 2006. "Excess Volatility in European Equity Style Indices - New Evidence," IWH Discussion Papers 16/2006, Halle Institute for Economic Research (IWH).
    11. Berneburg, Marian, 2007. "Systematic Mispricing in European Equity Prices?," IWH Discussion Papers 6/2007, Halle Institute for Economic Research (IWH).
    12. Ian Tonks & Andy Snell & George Bulkley, 1996. "Excessive Dispersion of US Stock Prices: A Regression Test of Cross-Sectional Volatility," FMG Discussion Papers dp246, Financial Markets Group.
    13. Walter Boudry & N. Coulson & Jarl Kallberg & Crocker Liu, 2012. "On the Hybrid Nature of REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 230-249, January.
    14. Koustas, Zisimos & Serletis, Apostolos, 2005. "Rational bubbles or persistent deviations from market fundamentals?," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2523-2539, October.
    15. Min Hwang & John Quigley & Jae-young Son, 2006. "The Dividend Pricing Model: New Evidence from the Korean Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 205-228, May.
    16. Black, Angela & Fraser, Patricia & Groenewold, Nicolaas, 2003. "How big is the speculative component in Australian share prices?," Journal of Economics and Business, Elsevier, vol. 55(2), pages 177-195.
    17. Jirasakuldech, Benjamas & Emekter, Riza & Rao, Ramesh P., 2008. "Do Thai stock prices deviate from fundamental values?," Pacific-Basin Finance Journal, Elsevier, vol. 16(3), pages 298-315, June.
    18. Black, Angela & Fraser, Patricia, 2002. "Stock market short-termism--an international perspective," Journal of Multinational Financial Management, Elsevier, vol. 12(2), pages 135-158, April.
    19. Simon van Norden & Huntley Schaller & ), 1995. "Speculative Behaviour, Regime-Switching, and Stock Market Crashes," Econometrics 9502003, EconWPA.
    20. Bansal, Ravi & Lundblad, Christian, 2002. "Market efficiency, asset returns, and the size of the risk premium in global equity markets," Journal of Econometrics, Elsevier, vol. 109(2), pages 195-237, August.

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