TY  - JOUR
AU  - Campbell,John Y.
TI  - Measuring the Persistence of Expected Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3305
PY  - 1991
Y2  - September 1991
UR  - http://www.nber.org/papers/w3305
L1  - http://www.nber.org/papers/w3305.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
AB  - This paper summarizes earlier research On the sources of variation in monthly U.S. stock returns in the period 1927-88. A log-linear model is used to break unexpected returns into changing expectations about future dividends and changing expectations about future returns. Even though stock returns are not highly forecastable, the model attributes one-third of the variation in returns to changing expected returns, one-third to changing future dividends, and one-third to the covariance between these components. Changing expected returns have a large effect on the stock market because their movements are persistent and negatively correlated with changing expected dividends.
ER  -