Stock Return Predictability: Is it There?

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ID: 294880
2006
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Abstract
We examine the predictive power of the dividend yields for forecasting excess returns, cash flows, and interest rates. Dividend yields predict excess returns only at short horizons together with the short rate and do not have any long-horizon predictive power. At short horizons, the short rate strongly negatively predicts returns. These results are robust in international data and are not due to lack of power. A present value model that matches the data shows that discount rate and short rate movements play a large role in explaining the variation in dividend yields. Finally, we find that earnings yields significantly predict future cash flows. (JEL C12, C51, C52, E49, F30, G12)
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openalex_W2914489443 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Andrew Ang, Geert Bekaert
Journal review of financial studies
Year 2006
DOI
10.1093/rfs/hhl021
URL
https://doi.org/10.1093/rfs/hhl021
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