Predictive Regressions: A Present-value Approach / Jules H. van Binsbergen, Ralph S.J. Koijen.

Format:

Book

Author/Creator:

van Binsbergen, Jules H.

Contributor:

National Bureau of Economic Research.

Koijen, Ralph S.J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16263.

NBER working paper series no. w16263

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

We propose a latent variables approach within a present-value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the history of price-dividend ratios and dividend growth rates to predict future returns and dividend growth rates. We find that returns and dividend growth rates are predictable with R-squared values ranging from 8.2% to 8.9% for returns and 13.9% to 31.6% for dividend growth rates. Both expected returns and expected dividend growth rates have a persistent component, but expected returns are more persistent than expected dividend growth rates.

Notes:

Print version record

August 2010.