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The price-dividend relationship in inflationary and deflationary regimes

Author

Listed:
  • Jakob B Madsen

    (University of Copenhagen)

  • Costas Milas

    (Keele University, Department of Economics)

Abstract

This paper argues that the linear price- dividend relationship as predicted in the Gordon (1962) model breaks down in regimes of high inflation and deflation. Using data for the US and the UK over the period from 1871 to 2002, nonlinear estimates support the prediction of the model.

Suggested Citation

  • Jakob B Madsen & Costas Milas, 2005. "The price-dividend relationship in inflationary and deflationary regimes," Keele Economics Research Papers KERP 2005/09, Centre for Economic Research, Keele University.
    • Handle: RePEc:kee:kerpuk:2005/09
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    File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0509.pdf
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    Cited by:

    1. is not listed on IDEAS
    2. Nagayasu, Jun, 2007. "Putting the dividend-price ratio under the microscope," Finance Research Letters, Elsevier, vol. 4(3), pages 186-195, September.
    3. Giot, Pierre & Petitjean, Mikael, 2007. "The information content of the Bond-Equity Yield Ratio: Better than a random walk?," International Journal of Forecasting, Elsevier, vol. 23(2), pages 289-305.
    4. Pierre Giot & Mikael Petitjean, 2009. "Short-term market timing using the bond-equity yield ratio," The European Journal of Finance, Taylor & Francis Journals, vol. 15(4), pages 365-384.
    5. Coakley, Jerry & Fuertes, Ana-Maria, 2006. "Valuation ratios and price deviations from fundamentals," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2325-2346, August.

    More about this item

    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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