Time-Disaggregated Dividend-Price Ratio and Dividend Growth Predictability in Large Equity Markets

32 Pages Posted: 21 Feb 2014 Last revised: 26 Jun 2016

See all articles by Panagiotis Asimakopoulos

Panagiotis Asimakopoulos

Loughborough University - School of Business and Economics; University of Piraeus

Stylianos Asimakopoulos

University of Bath

Nikolaos Kourogenis

University of Piraeus, Department of Banking and Financial Management

Emmanuel D. Tsiritakis

University of Piraeus

Date Written: February 19, 2014

Abstract

Even in large equity markets, the dividend-price ratio is significantly related with the growth of future dividends. In order to uncover this relationship, we use monthly dividends and a mixed data sampling technique which allows us to cope with within-year seasonality. We reduce the effect of price volatility on the dividend-price ratio by applying a simple smoothing technique, and we identify the component of the smoothed dividend-price ratio that offers predictive power. An empirical analysis using market level data from U.S., U.K., Canada and Japan strongly supports the dividend growth predictability hypothesis, suggesting that time-aggregation of dividends eliminates significant information.

Keywords: dividend growth, dividend-price ratio, predictability, dividend smoothing, mixed data sampling

JEL Classification: G12, G14, G15, G17

Suggested Citation

Asimakopoulos, Panagiotis and Asimakopoulos, Stylianos and Kourogenis, Nikolaos and Tsiritakis, Emmanuel D., Time-Disaggregated Dividend-Price Ratio and Dividend Growth Predictability in Large Equity Markets (February 19, 2014). Available at SSRN: https://ssrn.com/abstract=2398569 or http://dx.doi.org/10.2139/ssrn.2398569

Panagiotis Asimakopoulos

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

Stylianos Asimakopoulos

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Nikolaos Kourogenis (Contact Author)

University of Piraeus, Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

Emmanuel D. Tsiritakis

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
00302104142187 (Phone)

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