11 Pages Posted: 14 Jul 2013 Last revised: 1 Sep 2014
Date Written: 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.
Keywords: Tobin’s q ratio, S&P 500 Dividend Yield, VAR
JEL Classification: G12, G14, G17
Suggested Citation: Suggested Citation