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On the reversal of return and dividend growth predictability: A tale of two periods

Listed author(s):
  • Chen, Long

A disconcerting, albeit generally accepted, finding is that aggregate stock returns are predictable by dividend yield but dividend growth is unpredictable. I show that part of this lack of dividend growth predictability stems from how dividend growth is constructed. I then show a dramatic reversal of predictability in the 134 years during 1872-2005: stock returns are largely unpredictable in the first seven decades, but become predictable in the postwar period; dividend growth is strongly predictable in the prewar years but this predictability disappears in the postwar years. New evidence on the predictability of long-run returns and dividend growth is also shown.

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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 92 (2009)
Issue (Month): 1 (April)
Pages: 128-151

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Handle: RePEc:eee:jfinec:v:92:y:2009:i:1:p:128-151
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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