Dividends, prices and the present value model: firm level evidence

John Ogilvie Stephen Wilson, David Gordon McMillan, J Goddard

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

Recent stock price movements have led to a re-examination of the present value model. Typically, empirical Studies have employed a long span of US stock market index data, and have attributed a failure to detect cointegration to the presence of bubbles. This study considers UK firm-level data,and implements panel unit root and cointegration tests. Recent panel tests that allow for cross-sectional dependence control for factors such as bubbles that may result in temporary deviations from the long-run price-dividend relationship. The panel test results largely support the present value model, yielding evidence of cointegration between real prices and dividends.

Original languageEnglish
Pages (from-to)195-210
Number of pages16
JournalEuropean Journal of Finance
Volume14
Issue number3
DOIs
Publication statusPublished - Apr 2008

Keywords

  • stock prices
  • present value model
  • firm-level data
  • UNIT-ROOT TESTS
  • FINITE-SAMPLE PROPERTIES
  • ERROR-CORRECTION MODELS
  • STOCK-PRICES
  • RATIONAL BUBBLES
  • FRACTIONAL ALTERNATIVES
  • HETEROGENEOUS PANELS
  • COINTEGRATION TESTS
  • EQUITY PREMIUM
  • MARKET

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