IDEAS home Printed from https://ideas.repec.org/p/bis/biswps/75.html
   My bibliography  Save this paper

A note on the Gordon growth model with nonstationary dividend growth

Author

Listed:
  • Henri Pagès

    (Fondation Banque de France pour la Recherche)

Abstract

Researchers have sometimes argued that the recent ascent in stock prices could be explained in some measure by changes in expectations about long-run future dividend growth. For example, Barsky and De Long (1993) argue that a small random walk component in the growth rate of dividends, when extrapolated into the future, is capable of reproducing the large swings in US stock prices over the period 1880-1990. I show that the hypothesis of a nonstationary permanent growth rate of dividends is inconsistent with the Gordon growth model.

Suggested Citation

  • Henri Pagès, 1999. "A note on the Gordon growth model with nonstationary dividend growth," BIS Working Papers 75, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:75
    as

    Download full text from publisher

    File URL: http://www.bis.org/publ/work75.pdf
    File Function: Full PDF document
    Download Restriction: no

    File URL: http://www.bis.org/publ/work75.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John B. Carlson & Kevin H. Sargent, 1997. "The recent ascent of stock prices: can it be explained by earnings growth or other fundamentals?," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-12.
    2. N. Gregory Mankiw & David Romer & Matthew D. Shapiro, 1991. "Stock Market Forecastability and Volatility: A Statistical Appraisal," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(3), pages 455-477.
    3. Robert B. Barsky & J. Bradford De Long, 1993. "Why Does the Stock Market Fluctuate?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 291-311.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baresa, Suzana & Bogdan , Sinisa & Ivanovic, Zoran, 2013. "Strategy Of Stock Valuation By Fundamental Analysis," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 4(1), pages 45-51.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nathan S. Balke & Mark E. Wohar, 2006. "What Drives Stock Prices? Identifying the Determinants of Stock Price Movements," Southern Economic Journal, John Wiley & Sons, vol. 73(1), pages 55-78, July.
    2. Shively, Philip A., 2007. "Asymmetric temporary and permanent stock-price innovations," Journal of Empirical Finance, Elsevier, vol. 14(1), pages 120-130, January.
    3. Veronesi, Pietro, 2004. "The Peso problem hypothesis and stock market returns," Journal of Economic Dynamics and Control, Elsevier, vol. 28(4), pages 707-725, January.
    4. Fourçans André & Warin Thierry & Evans John T. & Hens Luc & Saenen Bert & Abid Fathi & Mikhail Azmi D. & Salehizadeh Mehdi, 2000. "Global Economy Quarterly, Issue 3," Global Economy Journal, De Gruyter, vol. 1(3), pages 109-109, December.
    5. Stijn Claessens & M Ayhan Kose, 2017. "Asset prices and macroeconomic outcomes: a survey," BIS Working Papers 676, Bank for International Settlements.
    6. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    7. Sampson, Michael, 2003. "New Eras and Stock Market Bubbles," Structural Change and Economic Dynamics, Elsevier, vol. 14(3), pages 297-315, September.
    8. Mesly, Olivier & Chkir, Imed & Racicot, François-Éric, 2019. "Predatory cells and puzzling financial crises: Are toxic products good for the financial markets?," Economic Modelling, Elsevier, vol. 78(C), pages 11-31.
    9. Rhys Bidder & Ian Dew-Becker, 2016. "Long-Run Risk Is the Worst-Case Scenario," American Economic Review, American Economic Association, vol. 106(9), pages 2494-2527, September.
    10. Cornelis A. Los, 2004. "Nonparametric Efficiency Testing of Asian Stock Markets Using Weekly Data," Finance 0409033, University Library of Munich, Germany.
    11. Miguel Henry & George Judge, 2019. "Permutation Entropy and Information Recovery in Nonlinear Dynamic Economic Time Series," Econometrics, MDPI, vol. 7(1), pages 1-16, March.
    12. Nathan S. Balke & Mark E. Wohar, 2001. "Explaining stock price movements: is there a case for fundamentals?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 22-34.
    13. Alexander S. Sangare, 2005. "Efficience des marchés : un siècle après Bachelier," Revue d'Économie Financière, Programme National Persée, vol. 81(4), pages 107-132.
    14. Reitz, Stefan, 2006. "On the predictive content of technical analysis," The North American Journal of Economics and Finance, Elsevier, vol. 17(2), pages 121-137, August.
    15. Guidolin, Massimo & Timmermann, Allan, 2007. "Properties of equilibrium asset prices under alternative learning schemes," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 161-217, January.
    16. Lars Lochstoer & Harjoat S. Bhamra, 2009. "Return Predictability and Labor Market Frictions in a Real Business Cycle Model," 2009 Meeting Papers 1257, Society for Economic Dynamics.
    17. Jesus Gonzalo & Tae-Hwy Lee & Weiping Yang, 2008. "Permanent and transitory components of GDP and stock prices: further analysis," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 1(1), pages 105-120.
    18. Geoffrey J. Warren, 2008. "Implications for Asset Pricing Puzzles of a Roll‐over Assumption for the Risk‐Free Asset," International Review of Finance, International Review of Finance Ltd., vol. 8(3‐4), pages 125-157, September.
    19. Leonardo Bartolini & Lorenzo Giorgianni, 2001. "Excess Volatility of Exchange Rates with Unobservable Fundamentals," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 518-530, August.
    20. Angelos Kanas & Yue Ma, 2004. "Intrinsic bubbles revisited: evidence from nonlinear cointegration and forecasting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(4), pages 237-250.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:biswps:75. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Fessler (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.