TY  - JOUR
AU  - Hodrick,Robert J.
TI  - Dividend Yields and Expected Stock Returns:  Alternative Procedures for Interference and Measurement
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 108
PY  - 1991
Y2  - July 1991
UR  - http://www.nber.org/papers/t0108
L1  - http://www.nber.org/papers/t0108.pdf
N1  - Author contact info:
Robert J. Hodrick
Graduate School of Business
Columbia University
3022 Broadway
New York, NY 10027
Tel: 212/854-3413
Fax: 212/316-9219
E-Mail: rh169@columbia.edu
AB  - 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.
ER  -