RT Journal Article
SR Electronic
T1 Dividend-Price Ratios and Stock Returns:
Another Look at the History
JF The Journal of Investing
FD Institutional Investor Journals
SP 15
OP 22
DO 10.3905/joi.2013.22.2.015
VO 22
IS 2
A1 Bradford Cornell
YR 2013
UL https://pm-research.com/content/22/2/15.abstract
AB A critical question for investors is the extent to which the expected returns on common stock are predictable. One of the prime pieces of evidence supporting the hypothesis that returns are predictable is that regressions of future returns on dividend-price ratios are highly significant, but future dividend growth is unrelated to the ratio. This article presents an alternate interpretation of these regression results that is consistent with the original version of the efficient market hypothesis, which holds that expected returns are unpredictable. The analysis is based on the economic history of the United States. The historical analysis not only provides an alternative interpretation of the regression results, but also highlights the importance of analyzing the specific historical events responsible for generating financial data.TOPICS: Fundamental equity analysis, statistical methods, portfolio theory