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The Dog and the Straw Man: Response to “Dividend Growth Does Not Help Predict Returns Compared to Likelihood-Based Tests: An Anatomy of the Dogâ€

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  • John H. Cochrane

Abstract

I respond to Hjalmarsson and Kiss (2021). Cochrane (2008) does not advocate a “data-dependent null,†a testing methodology in which one always uses a sample value as null hypothesis for a test statistic. In fact, I calculate sampling distributions for a wide variety of fixed null values of the parameters. How best to impose prior information that the dividend yield is stationary remains an important question highlighted by both papers.

Suggested Citation

  • John H. Cochrane, 2021. "The Dog and the Straw Man: Response to “Dividend Growth Does Not Help Predict Returns Compared to Likelihood-Based Tests: An Anatomy of the Dogâ€," Critical Finance Review, now publishers, vol. 10(3), pages 465-470, August.
    • Handle: RePEc:now:jnlcfr:104.00000106
    DOI: 10.1561/104.00000106
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    Keywords

    Predictive regressions; Present-value relationship; Stock-return predictability;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G1 - Financial Economics - - General Financial Markets

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