![Bubbles in the dividend-price ratio? Evidence from an asymmetric exponential smooth-transition model [An article from: Journal of Banking and Finance]](https://www.ebooknetworking.net/books/B00/0PD/bigB000PDTH4M.jpg)
Bubbles in the dividend-price ratio? Evidence from an asymmetric exponential smooth-transition model [An article from: Journal of Banking and Finance]
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Book Details
Author(s)
D.G. McMillan
Publisher
Elsevier
ISBN / ASIN
B000PDTH4M
ISBN-13
978B000PDTH40
Marketplace
France 🇫🇷
Description
This digital document is a journal article from Journal of Banking and Finance, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
Recent stock price movements have led to a re-examination of the present value model. An increasing belief is that although dividends and prices are indeed cointegrated, they may exhibit non-linear dynamics in the process of reversion. This paper implements an empirical model designed to capture two possible explanations for such non-linearity, namely transaction costs and noise traders. Utilising data from a number of countries we show that the dynamics of the log dividend yield are, first, characterised by an inner random walk regime, where the benefits of engaging in trade do not outweigh the costs and so the process moves randomly. Second, a reverting outer regime where the dynamics of reversion differ between positive and negative deviations, such that price rises greater than the level supported by dividends exhibit a greater degree of persistence than price falls relative to dividends.
Description:
Recent stock price movements have led to a re-examination of the present value model. An increasing belief is that although dividends and prices are indeed cointegrated, they may exhibit non-linear dynamics in the process of reversion. This paper implements an empirical model designed to capture two possible explanations for such non-linearity, namely transaction costs and noise traders. Utilising data from a number of countries we show that the dynamics of the log dividend yield are, first, characterised by an inner random walk regime, where the benefits of engaging in trade do not outweigh the costs and so the process moves randomly. Second, a reverting outer regime where the dynamics of reversion differ between positive and negative deviations, such that price rises greater than the level supported by dividends exhibit a greater degree of persistence than price falls relative to dividends.
