Explaining the Variance of Price Dividend Ratios
This paper presents a bound on the variance of the price-dividend ratio and a decomposition of the variance of the price-dividend ratio into components that reflect variation in expected future discount rates and variation in expected future dividend growth. Unobserved discount rates needed to make the variance bound and variance decomposition hold are characterized, and the variance bound and variance decomposition are tested for several discount rate models, including the consumption based model, and models based on interest rates plus a constant risk premium.
|Date of creation:||Nov 1989|
|Date of revision:|
|Publication status:||published as The Review of Financial Studies, Vol. 5, No. 2, pp. 243-280, (1992).|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3157. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.