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Dividend-Price Ratios and Stock Returns: International Evidence

Cornell, Bradford (2014) Dividend-Price Ratios and Stock Returns: International Evidence. Journal of Portfolio Management, 40 (2). pp. 122-127. ISSN 0095-4918. http://resolver.caltech.edu/CaltechAUTHORS:20140318-085256312

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Abstract

A widely replicated result, using U.S. data, is that dividend-price ratios predict future returns, not future dividend growth. This is evidence of stock-return predictability, and is contrary to the original interpretation of the efficient-market hypothesis. The author argues that this pre-dictability may be an artifact of the American economy’s remarkably stable real growth. This article examines the relation between dividend yields, future returns, and dividend growth, using current international data. It concludes that, in some countries, dividend-price ratios predict future returns; in other countries, they predict future dividend growth; and in still other countries, they predict a combination of the two. The variation, furthermore, is related to the volatility of real dividend growth.


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http://www.iijournals.com/doi/abs/10.3905/jpm.2014.40.2.122#sthash.essk3hcG.dpbsPublisherArticle
http://dx.doi.org/10.3905/jpm.2014.40.2.122#sthash.essk3hcG.dpufDOIArticle
Additional Information:© 2014 Institutional Investor Journals. I would like to thank John Campbell, John Cochrane, Jason Hsu, Robert Shiller, Walter Torous, and an anonymous referee for helpful comments. RALLC, Inc. kindly provided data.
Record Number:CaltechAUTHORS:20140318-085256312
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20140318-085256312
Official Citation:Bradford Cornell Dividend-Price Ratios and Stock Returns: International Evidence Winter 2014, Vol. 40, No. 2: pp. 122–127 DOI: 10.3905/jpm.2014.40.2.122
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:44373
Collection:CaltechAUTHORS
Deposited By: Ruth Sustaita
Deposited On:18 Mar 2014 17:16
Last Modified:18 Mar 2014 17:16

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