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http://ssrn.com/abstract=971278
 
 

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On the Reversal of Return and Dividend Growth Predictability: A Tale of Two Periods


Long Chen


Cheung Kong Graduate School of Business

May 2008


Abstract:     
A disconcerting, albeit generally accepted, finding is that aggregate stock return is predictable by dividend yield but dividend growth is unpredictable. I show that part of this lack of dividend growth predictability stems from how dividend growth is constructed. I then document a dramatic reversal of predictability in the 134 years during 1872-2005: stock return is largely unpredictable in the first seven decades, but becomes predictable in the postwar period; dividend growth is strongly predictable in the prewar years but this predictability disappears in the postwar years. New evidence on the predictability of long-run return and dividend growth is also documented.

Number of Pages in PDF File: 53

Keywords: Dividend price ratio, equity return, dividend growth, predictability

JEL Classification: G12, E44

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Date posted: March 25, 2008 ; Last revised: May 27, 2008

Suggested Citation

Chen, Long, On the Reversal of Return and Dividend Growth Predictability: A Tale of Two Periods (May 2008). Available at SSRN: http://ssrn.com/abstract=971278 or http://dx.doi.org/10.2139/ssrn.971278

Contact Information

Long Chen (Contact Author)
Cheung Kong Graduate School of Business ( email )
Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China
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