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Holding Period Return-Risk Modeling :The Importance of Dividends



    (Dept. of Finance, and Erasmus Research Institute of Management, Erasmus. University Rotterdam, POB 1738, NL-3000 DR Rotterdam, The Netherlands. Phone:+31.10.408-1290. Facsimile: +31.10.408-9165.

In this paper we explore the relevance of dividends in the total equity return over longer time horizons. In addition, we investigate the effects of different reinvestment assumptions of dividends. We use a unique set of revised and corrected US equity data series, comprising monthly prices and dividends based on consistent definitions over the period 1871-2002 (132 years). Our findings are relevant for performance evaluation, for estimating the historical equity risk premium, and for investment simulation. En este trabajo se estudia la relevancia de los dividendos como componente del rendimiento de los activos financiero en el horizonte del largo plazo. Adicionalmente, se estudian varias alternativas de reinversión para estos dividendos. Se usaran series de datos procedentes del mercado americano con información sobre precios y dividendos para el periodo comprendido entre 1871 y 2002. Los resultados son relevantes de cara al estudio de la rentabilidad, de la estimación de la prima de riesgo así como para la simulación de distintas alternativas de inversión.

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Article provided by Estudios de Economía Aplicada in its journal Estudios de Economía Aplicada.

Volume (Year): 23 (2005)
Issue (Month): (Abril)
Pages: 45-65

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Handle: RePEc:lrk:eeaart:23_1_3
Contact details of provider: Postal: Beatriz Rodríguez Prado. Facultad de CC.EE. y EE. Avda. Valle del Esgueva. Valladolid 47011 SPAIN
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  1. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
  2. Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-78, December.
  3. Bertola, Giuseppe & Svensson, Lars E O, 1991. "Stochastic Devaluation Risk and the Empirical Fit of Target Zone Models," CEPR Discussion Papers 513, C.E.P.R. Discussion Papers.
  4. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  5. repec:tpr:qjecon:v:106:y:1991:i:3:p:669-82 is not listed on IDEAS
  6. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
  7. Malliaropulos, Dimitrios, 1997. "A multivariate GARCH model of risk premia in foreign exchange markets," Economic Modelling, Elsevier, vol. 14(1), pages 61-79, January.
  8. repec:bla:restud:v:58:y:1991:i:3:p:587-602 is not listed on IDEAS
  9. Ledesma Rodríguez, F. J. & Navarro Ibáñez, Manuel & Pérez Rodríguez, J.V. & Sosvilla Rivero, S., 1999. "A study of the credibility of the Spanish peseta," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 11, pages 85-100, Febrero.
  10. Tai, Chu-Sheng, 2001. "A multivariate GARCH in mean approach to testing uncovered interest parity: evidence from Asia-Pacific foreign exchange markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(4), pages 441-460.
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