IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v9y1996i2p333-83.html
   My bibliography  Save this article

A New Dividend Forecasting Procedure That Rejects Bubbles in Asset Prices: The Case of 1929's Stock Crash

Author

Listed:
  • Donaldson, R Glen
  • Kamstra, Mark

Abstract

We develop a new procedure to forecast future cash flows from a financial asset and then use the present value of our cash flow forecasts to calculate the asset's fundamental price. As an example, we construct a nonlinear ARMA-ARCH-Artificial Neural Network Model to obtain out-of-sample dividend forecasts for 1920 and beyond, using only in-sample dividend data. The present value of our forecasted dividends yield fundamental prices that reproduce the magnitude, timing, and time-series behavior of the boom and crash in 1929 stock prices. We therefore reject the popular claim that the 1920s stock market contained a bubble. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Suggested Citation

  • Donaldson, R Glen & Kamstra, Mark, 1996. "A New Dividend Forecasting Procedure That Rejects Bubbles in Asset Prices: The Case of 1929's Stock Crash," The Review of Financial Studies, Society for Financial Studies, vol. 9(2), pages 333-383.
    • Handle: RePEc:oup:rfinst:v:9:y:1996:i:2:p:333-83
    as

    Download full text from publisher

    File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    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:oup:rfinst:v:9:y:1996:i:2:p:333-83. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    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.