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Dividend Yields for Forecasting Stock Market Returns. An ARDL Cointegration Analysis for Germany

Author

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  • Ansgar Belke

    (University of Hohenheim,Department of Economics, Stuttgart)

  • Thorsten Polleit

    (Barclays Capital and Business School of Finance & Management,Frankfurt)

Abstract

This paper empirically assesses the ability of dividend yields to predict future tock returns in Germany assuming efficient markets and rational expectations. Since the order of integration of repressors are not exactly known, a bound procedure, namely a n autoregressive distributed lag (ARDL) model, is applied to test for cointegrating relationships among future stock returns and today’s divided yields. It is also capable of dealing with the controversial issue of exogeneity of the dividend yield. ARDL and error-correction models are estimated for (future) stock returns and the dividend yield based on consistent estimates and standard normal asymptotic theory.

Suggested Citation

  • Ansgar Belke & Thorsten Polleit, 2006. "Dividend Yields for Forecasting Stock Market Returns. An ARDL Cointegration Analysis for Germany," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 9(1), pages 86-116, Summer.
  • Handle: RePEc:ekn:ekonom:v:9:y:2006:i:1:p:86-116
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    Cited by:

    1. Belke Ansgar, 2010. "Die Auswirkungen der Geldmenge und des Kreditvolumens auf die Immobilienpreise – Ein ARDL-Ansatz für Deutschland / Money, Credit and House Prices – An ARDL-Approach for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(2), pages 138-162, April.
    2. Ansgar Belke, 2009. "Die Auswirkungen der Geldmenge und des Kreditvolumens auf die Immobilienpreise: ein ARDL-Ansatz für Deutschland," Discussion Papers of DIW Berlin 953, DIW Berlin, German Institute for Economic Research.
    3. Ansgar Belke & Robert Czudaj, 2010. "Is Euro Area Money Demand (Still) Stable? Cointegrated VAR Versus Single Equation Techniques," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(4), pages 285-315.

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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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