TY - JOUR
AU - Campbell,John Y.
AU - Shiller,Robert J.
TI - The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors
JF - National Bureau of Economic Research Working Paper Series
VL - No. 2100
PY - 1986
Y2 - December 1986
DO - 10.3386/w2100
UR - http://www.nber.org/papers/w2100
L1 - http://www.nber.org/papers/w2100.pdf
N1 - Author contact info:
John Y. Campbell
Morton L. and Carole S.
Olshan Professor of Economics
Department of Economics
Harvard University
Littauer Center 213
Cambridge, MA 02138
Tel: 617/496-6448
Fax: 617/495-7730
E-Mail: john_campbell@harvard.edu
Robert J. Shiller
Yale University, Cowles Foundation
Box 208281
30 Hillhouse Avenue
New Haven, CT 06520-8281
Tel: 203/432-3708
Fax: 203/432-6167
E-Mail: robert.shiller@yale.edu
AB - A linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates. This relation can be tested using vector autoregressive methods. Three versions of the linearized model, differing in the measure of discount rates, are tested for U. S. time series 1871-1986: versions using real interest rate data, aggregate real consumption data, and return variance data. The results yield a metric to judge the relative importance of real dividend growth, measured real discount rates and unexplained factors in determining the dividend-price ratio.
ER -