TY  - JOUR
AU  - Cochrane,John H.
TI  - Explaining the Variance of Price Dividend Ratios
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3157
PY  - 1992
Y2  - July 1992
UR  - http://www.nber.org/papers/w3157
L1  - http://www.nber.org/papers/w3157.pdf
N1  - Author contact info:
John H. Cochrane
Booth School of Business
University of Chicago
5807 S. Woodlawn
Chicago, IL  60637
Tel: 773/702-3059
Fax: 773/702-0458
E-Mail: john.cochrane@chicagobooth.edu
AB  - This paper presents a bound on the variance of the price-dividend ratio and a decomposition of the variance of the price-dividend ratio into components that reflect variation in expected future discount rates and variation in expected future dividend growth. Unobserved discount rates needed to make the variance bound and variance decomposition hold are characterized, and the variance bound and variance decomposition are tested for several discount rate models, including the consumption based model, and models based on interest rates plus a constant risk premium.
ER  -