The Power Law and Dividend Yields

17 Pages Posted: 1 Aug 2004 Last revised: 14 Aug 2008

See all articles by Erik Lueders

Erik Lueders

Laval University; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Inge Lueders-Amann

Université Laval

Michael Schröder

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management

Date Written: 2004

Abstract

Recent research suggests that the power law is one of the most universal laws in nature and it also seems to work quite fine in economics and finance. In this paper we show that the power law explains extremely well the relationship between the value of broad-based market indices and their dividends. We also show that this relationship is consistent with declining relative risk aversion of the representative investor. Hence, the power law has a solid economic foundation.

Keywords: Power law, stock prices, dividends, co-integration

JEL Classification: G12, G15, E44

Suggested Citation

Lueders, Erik and Lueders-Amann, Inge and Schröder, Michael, The Power Law and Dividend Yields (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-051, Available at SSRN: https://ssrn.com/abstract=570541 or http://dx.doi.org/10.2139/ssrn.570541

Erik Lueders (Contact Author)

Laval University ( email )

Quebec G1K 7P4
Canada

Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Ste-Foy, Quebec G1K 7P4
Canada

Inge Lueders-Amann

Université Laval ( email )

Quebec G1K 7P4
Canada

Michael Schröder

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management ( email )

L 7,1
P.O. Box 10 34 43
D-68034 Mannheim
Germany
+49 621 1235 368 (Phone)
+49 621 1235 223 (Fax)

HOME PAGE: http://www.zew.de/en/team/msc/?cHash=c9507802336d8f7db96848c539ed2f89

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
194
Abstract Views
1,464
rank
170,741
PlumX Metrics