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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.

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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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