Demographic Trends, the Dividend-Price Ratio, and the Predictability of Long-Run Stock Market Returns

Favero, Gozluklu e Tamoni hanno pubblicato su Journal of Financial and Quantitative Analysis

Carlo Favero (Dipartimento di Finanza e IGIER), Arie Gozluklu e Andrea Tamoni (entrambi Scuola di Dottorato e Dipartimento di Finanza) hanno pubblicato Demographic Trends, the Dividend-Price Ratio, and the Predictability of Long-Run Stock Market Returns su Journal of Financial and Quantitative Analysis, Volume 46, Issue 05, October 2011, pp 1493-1520 doi: 10.1017/S0022109011000329.

Abstract: This paper documents the existence of a slowly evolving trend in the log dividend-price ratio, DPt, determined by a demographic variable, MYt: the middle-aged to young ratio. Deviations of DPt from this long-run component explain transitory but persistent fluctuations in stock market returns. The relation between MYt and DPt is a prediction of an overlapping generation model. The joint significance of MY and DPt in long-horizon forecasting regressions for market returns explains the mixed evidence on the ability of DPt to predict stock returns and provide a model-based interpretation of statistical corrections for breaks in the mean of this financial ratio.