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    Miller and Modigliani, predictive return regressions and cointegration

    Alessandri, P. and Robertson, D. and Wright, Stephen (2008) Miller and Modigliani, predictive return regressions and cointegration. Oxford Bulletin of Economics & Statistics 70 (2), pp. 181-207. ISSN 0305-9049.

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    Abstract

    This paper investigates the use of alternative measures of dividend yields to predict US aggregate stock returns. Following Miller and Modigliani [Journal of Business (1961), Vol. 34, pp. 411–433] we construct a cashflow yield that includes both dividend and non-dividend cashflows to shareholders. Using a data set covering the course of the 20th century, we show in a cointegrating vector autoregression framework that this measure has strong and stable predictive power for returns. The weak predictive power of standard measures of the dividend yield is explained by the strong rejection of the implied cointegrating and causality restrictions on the impact of non-dividend cashflows.

    Metadata

    Item Type: Article
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Administrator
    Date Deposited: 26 Jan 2011 16:09
    Last Modified: 02 Aug 2023 16:51
    URI: https://eprints.bbk.ac.uk/id/eprint/1996

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