Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/22662
Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Stock Return, Dividend Growth and Consumption Growth Predictability Across Markets and Time: Implications for stock price movement
Authors: McMillan, David
Contact Email: david.mcmillan@stir.ac.uk
Keywords: Stock returns
Dividend growth
Consumption growth
Predictability
Discount rates
Cash flow
Issue Date: Oct-2014
Publisher: Elsevier
Citation: McMillan D (2014) Stock Return, Dividend Growth and Consumption Growth Predictability Across Markets and Time: Implications for stock price movement, International Review of Financial Analysis, 35, pp. 90-101.
Abstract: This paper links variation in the predictive regressions for stock returns, dividend growth and consumption growth to economic and market factors. The nature of these links can reveal whether movement in asset prices occurs primarily through the discount rate or cash flow channel, while they also help explain the reported mixed results for predictability. Variation is examined through cross-sectional regressions across 15 markets and over time using rolling regressions. The cross-sectional and time-varying parameters are regressed against output growth, interest rates and inflation as well as market variables using fixed effects panel as well as both OLS and logit approaches. The key implication for asset pricing is that although movement occurs through both channels, stock return predictability is more dominated by the discount rate channel and consumption growth predictability more so by the cash flow channel. Intuitively, such a difference may arise as investors and households rebalance their asset holdings and consumption at different speeds. There is also some evidence of money illusion through the inflation variable.
Type: Journal Article
URI: http://hdl.handle.net/1893/22662
DOI Link: http://dx.doi.org/10.1016/j.irfa.2014.07.011
Rights: The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study.
Affiliation: Accounting and Finance

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