Dividend-price Ratio, Dividend Growth and the Future Returns

摘要

This paper surveys the fields of relationship between the stock future returns and dividend yield. We studied if the dividend-price ratio can be used as a predictor of future returns. According to the accounting identity, we have an implication that the asset price should predict a discounted sum of future dividends and that the price-dividend ratio should predict a discounted sum of future changes in dividends.Since we can not find enough data in China Stock market for its short history, we use the dividend yields and stock returns from 1926 to 2004 on U.S stock market. We estimated the relationship of dividend-price ratio to the returns of different horizons, which are 1,2,3,4,5 and 10 years relatively with four models of stock returns and dividend-price ratio both in level and log forms. We find the dividend-price ratio explains better the returns as the return horizon gets longer. We also tested the relation between dividend-price ratio and dividend growth with different horizons and get the same results as the first above sho. Thus we conclude that across the long horizon the dividend growth and dividend-price ratio have a close correlation and the dividend-price ratio can be regarded as a good predictor of the stock future returns.