Dividend Yields and Expected Stock Returns: Alternative Procedures for Interference and Measurement
NBER Technical Working Paper No. 108
Alternative ways of conducting inference and measurement for long-horizon forecasting are explored with an application to dividend yields as predictors of stock returns. Monte Carlo analysis indicates that the Hansen and Hodrick (1980) procedure is biased at long horizons, but the alternatives perform better. These include an estimator derived under the null hypothesis as in Richardson and Smith (1989), a reformulation of the regression as in Jegadeesh (1990), and a vector autoregression (VAR) as in Campbell and Shiller (1988), Kandel and Stambaugh (1988), and Campbell (1991). The statistical properties of long-horizon statistics generated from the VAR indicate interesting patterns in expected stock returns.
Document Object Identifier (DOI): 10.3386/t0108
Published: Review of Financial Studies 5, no. 3, pp. 357-386, 1992
Users who downloaded this paper also downloaded these: