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Stock return predictability and stationarity of dividend yield

Author

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  • Kuang-Liang Chang

    (Department of Applied Economics, National Chiayi University, Taiwan)

Abstract

This paper first investigates the stationarity of dividend yield and then analyzes the predictive ability of the adjusted dividend yield which removes structural changes and high persistence characteristics. Empirical results have found that the dividend yield follows a mean-reverting process in each regime, and the convergence speed depends on the mean and variance. Moreover, the dividend yield is also global stationary. Finally, the adjusted dividend yield can predict future stock returns, and its predictive ability is time-invariant.

Suggested Citation

  • Kuang-Liang Chang, 2012. "Stock return predictability and stationarity of dividend yield," Economics Bulletin, AccessEcon, vol. 32(1), pages 715-729.
    • Handle: RePEc:ebl:ecbull:eb-11-00624
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    mean reversion; regime switching; stationarity; stock return predictability;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • G1 - Financial Economics - - General Financial Markets

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