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Changes in the composition of publicly traded firms: Implications for the dividend-price ratio and return predictability

Listed author(s):
  • Jank, Stephan

This article documents how the changing composition of U.S. publicly traded firms has prompted a decline in the long-run mean of the aggregate dividend-price ratio, most notably since the 1970s. Adjusting the dividend-price ratio for such changes resolves several issues with respect to the predictability of stock market returns: The adjusted dividend-price ratio is less persistent, in-sample evidence for predictability is more pronounced, there is greater parameter stability in the predictive regression (particularly during the 1990s), and there is evidence of out-of-sample predictability.

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File URL: https://www.econstor.eu/bitstream/10419/66661/1/730051781.pdf
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Paper provided by University of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 12-08.

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Date of creation: 2012
Handle: RePEc:zbw:cfrwps:1208
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