Abstract

http://ssrn.com/abstract=968053
 
 

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Predictive Regressions: A Present-Value Approach


Jules H. Van Binsbergen


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Ralph S. J. Koijen


London Business School - Department of Finance; National Bureau of Economic Research (NBER)

January 12, 2009


Abstract:     
We propose a latent-variables approach within a present-value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the whole history of the price-dividend ratio and dividend growth rates to obtain predictors for future returns and dividend growth rates. We find that both returns and dividend growth rates are predictable with R-squared values ranging from 8.2-8.9 percent for returns and 13.9-31.6 percent for dividend growth rates. Both expected returns and expected dividend growth rates have a persistent component, but expected returns are more persistent than expected dividend growth rates.

Number of Pages in PDF File: 48

Keywords: predictive regressions, present-value models

JEL Classification: G12, C32

working papers series





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Date posted: March 4, 2007 ; Last revised: September 15, 2013

Suggested Citation

van Binsbergen, Jules H. and Koijen, Ralph S. J., Predictive Regressions: A Present-Value Approach (January 12, 2009). Available at SSRN: http://ssrn.com/abstract=968053 or http://dx.doi.org/10.2139/ssrn.968053

Contact Information

Jules H. Van Binsbergen
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen
Ralph S. J. Koijen (Contact Author)
London Business School - Department of Finance ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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