Four Centuries of Return Predictability / Benjamin Golez, Peter Koudijs.

Format:

Book

Author/Creator:

Golez, Benjamin.

Contributor:

National Bureau of Economic Research.

Koudijs, Peter.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20814.

NBER working paper series no. w20814

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

We combine annual stock market data for the most important equity markets of the last four centuries: the Netherlands/U.K. (1629-1812), U.K. (1813-1870) and U.S. (1871-2015). We show that dividend yields are stationary and consistently forecast returns. The documented predictability holds for annual and multi-annual horizons and works both in and out-of-sample, providing strong evidence that expected returns in stock markets are time-varying. Much of this variation is related to the business cycle, with expected returns increasing in recessions. We also find that, except for the period after 1945, dividend yields predict dividend growth rates.

Notes:

Print version record

December 2014.