One Simple Test of Samuelson's Dictum for the Stock Market
Sangmyung University - Division of Economics & International Trade
Robert J. Shiller
Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance
Cowles Foundation Discussion Paper No. 1386; Yale ICF Working Paper No. 02-39
Samuelson (1998) offered the dictum that the stock market is "micro efficient" but "macro inefficient." That is, the efficient markets hypothesis works much better for individual stocks than it does for the aggregate stock market. In this paper, we present one simple test, based both on regressions and on a simple scatter diagram that vividly illustrates that there is some truth to Samuelson's dictum. The data comprise all U.S. firms on the CRSP tape that have survived since 1926.
Number of Pages in PDF File: 19
Keywords: Market Efficiency, Random Walk, Dividend Yield, Dividend Price Ratio, Present Value, Excess Volatility, Gordon Model
JEL Classification: G14
Date posted: November 4, 2002
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