Uncovering Dividend Growth Predictability: New Evidence from the Post-WW II Period

55 Pages Posted: 25 Mar 2013 Last revised: 23 Jun 2015

See all articles by Abhay Abhyankar

Abhay Abhyankar

University of Exeter Business School, University of Exeter

Pedro Garcia-Ares

University of Exeter

Date Written: June 22, 2015

Abstract

We re-visit a puzzling result that in U.S. post-WW II data the dividend price ratio can predict aggregate returns but not dividend growth. We find that predictive regressions are sensitive to the method used to aggregate firm-level data. Using value weighted firm-level data we find strong evidence for dividend growth predictability in the post-WW II period. We explore the reasons behind the differences in predictability due to different weighting methods. We find that these differences in predictability are related to the fact, in the data, that it is not always the largest firms that pay the largest dollar dividends or earnings.

Keywords: asset pricing, dividend growth predictability, present-value model, predictability of stock returns, weighting of firm dividends, changes in dividend payments, quintiles, earnings

JEL Classification: C22, E44, G1, G12, G14, G35

Suggested Citation

Abhyankar, Abhay and Garcia-Ares, Pedro, Uncovering Dividend Growth Predictability: New Evidence from the Post-WW II Period (June 22, 2015). Available at SSRN: https://ssrn.com/abstract=2239227 or http://dx.doi.org/10.2139/ssrn.2239227

Abhay Abhyankar

University of Exeter Business School, University of Exeter ( email )

Streatham Court
Exeter, EX4 4PU
United Kingdom

Pedro Garcia-Ares (Contact Author)

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

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