TY  - JOUR
AU  - Shiller,Robert J.
TI  - Comovements in Stock Prices and Comovements in Dividends
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2846
PY  - 1989
Y2  - February 1989
UR  - http://www.nber.org/papers/w2846
L1  - http://www.nber.org/papers/w2846.pdf
N1  - Author contact info:
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  - Simple efficient markets models imply that the covariance between prices of speculative assets cannot exceed the covariance between their respective fundamentals unless there is positive information pooling. Positive information pooling occurs when there is more information, in a sense defined here, about the aggregate of the fundamentals than there is about the individual fundamentals. With constant discount rates, the covariance between prices (detrended by dividing by a moving average of lagged dividends) in the U. K. and the U. S. exceeds the covariance of the measure of fundamentals, and there is no evidence of positive information pooling. Regression tests of forecast errors in one country on a real price variable in another country show significantly negative coefficients. When the present value formula uses short rates to discount, there is less evidence of excess comovement.
ER  -