Citation

Discussion Paper Details

Please find the details for DP7734 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Demographic Trends, the Dividend-Price Ratio and the Predictability of Long-Run Stock Market Returns

Author(s): Carlo A. Favero, Arie Gozluklu and Andrea Tamoni

Publication Date: March 2010

Keyword(s): demographics, dynamic dividend growth model and long run returns predictability

Programme Area(s): Financial Economics and International Macroeconomics

Abstract: This paper documents the existence of a slowly evolving trend in the dividend-price ratio, dpt, determined by a demographic variable, MY: the middle-aged to young ratio. Deviations of dpt from this long-run component explain transitory but persistent fluctuations in stock market returns. The relation between MY and dpt is a prediction of an overlapping generation model. The joint significance of MY and dpt in long-horizon forecasting regressions for market returns explain the mixed evidence on the ability of dpt to predict stock returns and provide a model-based interpretation of statistical corrections for breaks in the mean of this financial ratio.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7734

Bibliographic Reference

Favero, C, Gozluklu, A and Tamoni, A. 2010. 'Demographic Trends, the Dividend-Price Ratio and the Predictability of Long-Run Stock Market Returns'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7734