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One Simple Test of Samuelson's Dictum for the Stock Market

19 Pages Posted: 4 Nov 2002  

Jeeman Jung

Sangmyung University - Division of Economics & International Trade

Robert J. Shiller

Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance

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Date Written: November 2002

Abstract

Samuelson (1998) offered the dictum that the stock market is "micro efficient" but "macro inefficient." That is, the efficient markets hypothesis works much better for individual stocks than it does for the aggregate stock market. In this paper, we present one simple test, based both on regressions and on a simple scatter diagram that vividly illustrates that there is some truth to Samuelson's dictum. The data comprise all U.S. firms on the CRSP tape that have survived since 1926.

Keywords: Market Efficiency, Random Walk, Dividend Yield, Dividend Price Ratio, Present Value, Excess Volatility, Gordon Model

JEL Classification: G14

Suggested Citation

Jung, Jeeman and Shiller, Robert J., One Simple Test of Samuelson's Dictum for the Stock Market (November 2002). Cowles Foundation Discussion Paper No. 1386; Yale ICF Working Paper No. 02-39. Available at SSRN: https://ssrn.com/abstract=348180

Jeeman Jung

Sangmyung University - Division of Economics & International Trade ( email )

7 Hongjidong, Jongro-ku
Seoul, 110-743
Korea

Robert J. Shiller (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
203-432-3708 (Phone)

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://www.econ.yale.edu/~shiller/

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