Time-Disaggregated Dividend–Price Ratio and Dividend Growth Predictability in Large Equity Markets

We consistently show that in large equity markets, the dividend–price ratio is significantly related to the growth of future dividends. To uncover this relation, we use monthly dividends and a mixed data sampling technique, which allows us to address within-year seasonality. Our approach avoids the...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2017-10, Vol.52 (5), p.2305-2326
Main Authors: Asimakopoulos, Panagiotis, Asimakopoulos, Stylianos, Kourogenis, Nikolaos, Tsiritakis, Emmanuel
Format: Article
Language:English
Subjects:
Dividends
Equity
Hypotheses
Quantitative analysis
Stock exchanges
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Summary:We consistently show that in large equity markets, the dividend–price ratio is significantly related to the growth of future dividends. To uncover this relation, we use monthly dividends and a mixed data sampling technique, which allows us to address within-year seasonality. Our approach avoids the use of overlapping observations and at the same time reduces the impact of price volatility on the dividend–price ratio. An empirical analysis using market-level data from the United States, United Kingdom, Canada, and Japan strongly supports the dividend growth predictability hypothesis, suggesting that time aggregation of dividends eliminates significant information.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109017000643