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Stock Market Dividend Yield and Tobin's Q

11 Pages Posted: 14 Jul 2013 Last revised: 1 Sep 2014

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: July 14, 2013

Abstract

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.

Keywords: Tobin’s q ratio, S&P 500 Dividend Yield, VAR

JEL Classification: G12, G14, G17

Suggested Citation

Sum, Vichet, Stock Market Dividend Yield and Tobin's Q (July 14, 2013). Available at SSRN: https://ssrn.com/abstract=2293520 or http://dx.doi.org/10.2139/ssrn.2293520

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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