Changes in the Composition of Publicly Traded Firms: Implications for the Dividend-Price Ratio and Return Predictability

This paper documents how the changing composition of U.S. publicly traded firms has prompted a decline in the long-run mean of the aggregate dividend-price ratio, most notably since the 1970s. Adjusting the dividend-price ratio for such changes resolves several issues with respect to the predictability of stock market returns: the adjusted dividend-price ratio is less persistent, in-sample evidence for predictability is more pronounced, there is greater parameter stability in the predictive regression (particularly during the 1990s), and there is evidence of out-of-sample predictability. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1883 . This paper was accepted by Itay Goldstein, finance.

• 저널Management Science · 61(6) · 1362–1377
• 토픽Financial Markets and Investment Strategies · Finance
• DOI10.1287/mnsc.2013.1883
• 저자Stephan Jank