Stock Market Dividend Yield and Tobin's Q
University of Maryland Eastern Shore - School of Business and Technology
July 14, 2013
This study examines how the percentage change in S&P 500 dividend yield (DY) dynamically responds to shock to the change in aggregate Tobin’s q ratio (∆TBQ). The results from the VAR analysis of quarterly data from 1951Q4 to 2012Q4 show that DY significantly declines immediately following the shock to ∆TBQ. The Granger-causality test results reveal that ∆TBQ Granger-causes DY; there is no response feedback from DY to ∆TBQ. The variance decomposition results show that ∆TBQ forecasts about 67.50% of DY at the 2-quarter horizon and 67.80% at the 4-quarter horizon.
Number of Pages in PDF File: 11
Keywords: Tobin’s q ratio, S&P 500 Dividend Yield, VAR
JEL Classification: G12, G14, G17
Date posted: July 14, 2013 ; Last revised: September 1, 2014