IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-07g10003.html
   My bibliography  Save this article

Stock Prices and Dividends in Taiwan's Stock Market: Evidence Based on Time-Varying Present Value Model

Author

Listed:
  • Chi-Wei Su

    (Department of Finance, Providence University, Taichung, Taiwan)

  • Yahn-Shir Chen

    (Department of Accounting, National Yunlin University of Science and Technology)

  • Hsu-Ling Chang

    (Department of Accounting and Information, Ling Tung University, Taichung, TAIWAN)

Abstract

In this study, we use the newly developed momentum threshold unit root and cointegration tests advanced by Enders and Granger (1998), and Enders and Siklos (2001) to investigate if there is any asymmetric adjustment in long-run prices and dividends in Taiwan¡¦s stock market during June 1991 to February 2005. The empirical results indicate that long-run prices and dividends cointegration relationship holds for the majority of Taiwan¡¦s stock market, but that adjustment mechanism is asymmetric. The results for most industries from the M-TAR cointegration tests attest to the absence of rational bubbles in Taiwan¡¦s stock market. These results have important policy implications for investors.

Suggested Citation

  • Chi-Wei Su & Yahn-Shir Chen & Hsu-Ling Chang, 2007. "Stock Prices and Dividends in Taiwan's Stock Market: Evidence Based on Time-Varying Present Value Model," Economics Bulletin, AccessEcon, vol. 7(4), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-07g10003
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/pubs/EB/2007/Volume7/EB-07G10003A.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-176, April.
    2. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-1088, October.
    3. Barnett, William A. & Serletis, Apostolos, 2000. "Martingales, nonlinearity, and chaos," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 703-724, June.
    4. Hsiao, Cheng, 1979. "Causality tests in econometrics," Journal of Economic Dynamics and Control, Elsevier, vol. 1(4), pages 321-346, November.
    5. Abhyankar, A & Copeland, L S & Wong, W, 1997. "Uncovering Nonlinear Structure in Real-Time Stock-Market Indexes: The S&P 500, the DAX, the Nikkei 225, and the FTSE-100," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 1-14, January.
    6. Cochrane, John H. & Sbordone, Argia M., 1988. "Multivariate estimates of the permanent components of GNP and stock prices," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 255-296.
    7. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vojtech Kotrba, 2023. "Testing “hot hand” hypothesis at the individual athletes' level in soccer," Economics Bulletin, AccessEcon, vol. 43(3), pages 1356-1365.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:ebl:ecbull:v:7:y:2007:i:4:p:1-12 is not listed on IDEAS
    2. Bohl, Martin T. & Siklos, Pierre L., 2004. "The present value model of U.S. stock prices redux: a new testing strategy and some evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(2), pages 208-223, May.
    3. Pawel Milobedzki, 2010. "The Term Structure of the Polish Interbank Rates. A Note on the Symmetry of their Reversion to the Mean," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 10, pages 81-95.
    4. Chen, Shyh-Wei & Xie, Zixiong, 2017. "Asymmetric adjustment and smooth breaks in dividend yields: Evidence from international stock markets," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 339-354.
    5. Pelin ÖGE GÜNEY, 2013. "The Term Structure of Interest Rates: A Cointegration Analysis in the Non-Linear STAR Framework," Journal of Economics and Behavioral Studies, AMH International, vol. 5(12), pages 851-860.
    6. McMillan, David G., 2007. "Bubbles in the dividend-price ratio? Evidence from an asymmetric exponential smooth-transition model," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 787-804, March.
    7. Cuñado, J. & Gil-Alana, L.A. & Perez de Gracia, F., 2012. "Testing for persistent deviations of stock prices to dividends in the Nasdaq index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(20), pages 4675-4685.
    8. Zeno Rotondi, 2006. "The Macroeconomy and the Yield Curve: A Review of the Literature with Some New Evidence," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 65(2), pages 193-224, November.
    9. Daiki Maki, 2006. "Non-linear adjustment in the term structure of interest rates: a cointegration analysis in the non-linear STAR framework," Applied Financial Economics, Taylor & Francis Journals, vol. 16(17), pages 1301-1307.
    10. Martin T. Bohl & Pierre L. Siklos, 2004. "The Bundesbank's Inflation Policy and Asymmetric Behavior of the German Term Structure," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 495-508, August.
    11. Yu-Shao Liu & Chi-Wei Su, 2010. "The relationship between the real estate and stock markets of China: evidence from a nonlinear model," Applied Financial Economics, Taylor & Francis Journals, vol. 20(22), pages 1741-1749.
    12. Petra Posedel & Maruška Vizek, 2011. "Are House Prices Characterized by Threshold Effects? Evidence from Developed and Post-Transition Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(6), pages 584-600, December.
    13. Kunst, Robert M., 2002. "Decision Maps for Bivariate Time Series with Potential Thrshold Cointegration," Economics Series 121, Institute for Advanced Studies.
    14. J. Cunado & L. A. Gil-Alana & F. Perez de Gracia, 2007. "Testing for stock market bubbles using nonlinear models and fractional integration," Applied Financial Economics, Taylor & Francis Journals, vol. 17(16), pages 1313-1321.
    15. Tsangyao Chang & Wen-Chi Liu, 2008. "Rational Bubbles in the Korea Stock Market? Further Evidence based on Nonlinear and Nonparametric Cointegration Tests," Economics Bulletin, AccessEcon, vol. 3(34), pages 1-12.
    16. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.
    17. Xie, Zixiong & Chen, Shyh-Wei, 2015. "Are there periodically collapsing bubbles in the REIT markets? New evidence from the US," Research in International Business and Finance, Elsevier, vol. 33(C), pages 17-31.
    18. Kuo, Shew-Huei & Enders, Walter, 2004. "The term structure of Japanese interest rates:: The equilibrium spread with asymmetric dynamics," Journal of the Japanese and International Economies, Elsevier, vol. 18(1), pages 84-98, March.
    19. Bohl, Martin T., 2003. "Periodically collapsing bubbles in the US stock market?," International Review of Economics & Finance, Elsevier, vol. 12(3), pages 385-397.
    20. Bec, Frederique & Guay, Alain & Guerre, Emmanuel, 2008. "Adaptive consistent unit-root tests based on autoregressive threshold model," Journal of Econometrics, Elsevier, vol. 142(1), pages 94-133, January.
    21. Mark E. Wohar & Robert Sollis, 2007. "Tests for Asymmetric Threshold Cointegration with an Application to the Term Structure," Journal of Economic Insight, Missouri Valley Economic Association, vol. 33(2), pages 1-19.

    More about this item

    Keywords

    Momentum Threshold Autoregressive (MTAR) Cointegration Tests Rational Bubbles Asymmetric Adjustment;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-07g10003. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.