On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing
Interdisciplinary Center (IDC) - Rothschild Center
Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC)
Matthew P. Richardson
New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)
Michael R. Roberts
The Wharton School - University of Pennsylvania; National Bureau of Economic Research (NBER)
Journal of Finance, Forthcoming
We investigate the empirical implications of using various measures of payout yield rather than dividend yield for asset pricing models. We find statistically and economically significant predictability in the time series when payout (dividends plus repurchases) and net payout (dividends plus repurchases minus issuances) yields are used instead of dividend yield. Similarly, we find that payout (net payout) yields contain information about the cross-section of expected stock returns exceeding that of dividend yield and that the high minus low payout yield portfolio is a priced factor.
Keywords: Stock Returns, Predictability, Dividend Yield, Share Repurchases, Measurement Error
JEL Classification: G12, G35, C22, C33Accepted Paper Series
Date posted: February 7, 2006
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