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The dividend ratio model and small sample bias : A Monte Carlo study

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  • Campbell, John Y.
  • Shiller, Robert J.

Abstract

Small sample properties of parameter estimates and test statistics in the vector autoregressive dividend ratio model (Campbell and Shiller [1988 a,b]) are derived by stochastic simulation. The data generating processes are co integrated vector autoregressive models, estimated subject to restrictions implied by the dividend ratio model, or altered to show a unit root.
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Suggested Citation

  • Campbell, John Y. & Shiller, Robert J., 1989. "The dividend ratio model and small sample bias : A Monte Carlo study," Economics Letters, Elsevier, vol. 29(4), pages 325-331.
    • Handle: RePEc:eee:ecolet:v:29:y:1989:i:4:p:325-331
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    1. Flavin, Marjorie A, 1983. "Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 929-956, December.
    2. Campbell, John & Shiller, Robert, 1988. "Stock Prices, Earnings, and Expected Dividends," Scholarly Articles 3224293, Harvard University Department of Economics.
    3. John Y. Campbell, Robert J. Shiller, 1988. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," The Review of Financial Studies, Society for Financial Studies, vol. 1(3), pages 195-228.
    4. Marsh, Terry A & Merton, Robert C, 1986. "Dividend Variability and Variance Bounds Tests for the Rationality ofStock Market Prices," American Economic Review, American Economic Association, vol. 76(3), pages 483-498, June.
    5. repec:bla:jfinan:v:43:y:1988:i:3:p:661-76 is not listed on IDEAS
    6. Joe Mattey and Richard Meese., 1986. "Empirical Assessment of Present Value Relations," Research Program in Finance Working Papers 162, University of California at Berkeley.
    7. Kleidon, Allan W, 1986. "Variance Bounds Tests and Stock Price Valuation Models," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 953-1001, October.
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    1. Alina Lucia Trifan, 2009. "Testing Capital Asset Pricing Model For Romanian Capital Market," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(11), pages 1-43.
    2. Molina-Muñoz, Jesús & Mora-Valencia, Andrés & Perote, Javier, 2020. "Market-crash forecasting based on the dynamics of the alpha-stable distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 557(C).
    3. Mercereau, Benoît & Miniane, Jacques Alain, 2008. "Should We Trust the Empirical Evidence from Present Value Models of the Current Account?," Economics Discussion Papers 2008-10, Kiel Institute for the World Economy (IfW Kiel).
    4. Ferson, Wayne E. & Sarkissian, Sergei & Simin, Timothy, 2008. "Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(2), pages 331-353, June.
    5. Park, Dojoon & Hahn, Jaehoon & Eom, Young Ho, 2024. "Predicting the equity premium with financial ratios: A comprehensive look over a long period in Korea," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    6. Diego Comin & Mark Gertler & Ana Maria Santacreu, 2009. "Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations," Harvard Business School Working Papers 09-134, Harvard Business School.
    7. Lorenzo Camponovo & O. Scaillet & Fabio Trojani, 2013. "Predictability Hidden by Anomalous Observations," Swiss Finance Institute Research Paper Series 13-05, Swiss Finance Institute.
    8. Robert J. Shiller, 2014. "Speculative Asset Prices (Nobel Prize Lecture)," Cowles Foundation Discussion Papers 1936, Cowles Foundation for Research in Economics, Yale University.
    9. Doron Avramov & Guofu Zhou, 2010. "Bayesian Portfolio Analysis," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 25-47, December.
    10. Lleo, Sebastien & Ziemba, William T., 2014. "Does the bond-stock earning yield differential model predict equity market corrections better than high P/E models?," LSE Research Online Documents on Economics 59290, London School of Economics and Political Science, LSE Library.
    11. repec:bla:jecsur:v:16:y:2002:i:3:p:301-55 is not listed on IDEAS
    12. Robert J. Shiller, 2014. "Speculative Asset Prices," American Economic Review, American Economic Association, vol. 104(6), pages 1486-1517, June.
    13. Oliver D. Bunn & Robert J. Shiller, "undated". "Changing Times, Changing Values: A Historical Analysis of Sectors within the US Stock Market 1872-2013," Cowles Foundation Discussion Papers 1950, Cowles Foundation for Research in Economics, Yale University.
    14. repec:bla:germec:v:11:y:2010:i::p:465-486 is not listed on IDEAS
    15. Sébastien Lleo & William T. Ziemba, 2017. "Does the bond‐stock earnings yield differential model predict equity market corrections better than high P/E models?," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 26(2), pages 61-123, May.
    16. Holtemöller Oliver & Schulz Rainer, 2010. "Investor Rationality and House Price Bubbles: Berlin and the German Reunification," German Economic Review, De Gruyter, vol. 11(4), pages 465-486, December.
    17. Jawadi, Fredj & Namouri, Hela & Ftiti, Zied, 2018. "An analysis of the effect of investor sentiment in a heterogeneous switching transition model for G7 stock markets," Journal of Economic Dynamics and Control, Elsevier, vol. 91(C), pages 469-484.

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