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

Published online by Cambridge University Press:  31 October 2017

Panagiotis Asimakopoulos ,
Stylianos Asimakopoulos ,
Nikolaos Kourogenis  and
Emmanuel Tsiritakis
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Abstract

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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 5 , October 2017 , pp. 2305 - 2326
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

The authors thank an anonymous referee and Stephen Brown (the editor) for helpful comments.

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