European Business Schools Librarian's Group
Working Papers,
Copenhagen Business School, Department of Economics
No 12-2000: MODELING THE DIVIDEND-PRICE RATIO: THE ROLE OF FUNDAMENTALS USING A REGIME-SWITCHING APPROACH
Steen Nielsen and Jan Overgaard Olesen
Additional contact information
Steen Nielsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Jan Overgaard Olesen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Abstract: Using annual data over the post-World War I-period, we estimate a fundamentals-based
empirical model for the dividend-price ratio of Danish stocks. The key fundamentals-variable
is a time-varying discount rate, decomposed into time-varying measures for the growth-adjusted
real interest rate and the risk premium on stocks. In addition, the model includes
real dividends and the lagged dividend-price ratio as explanatory variables. Results show
that the model suffers from structural breaks over the sample. Using a two-state regime-switching
approach to capture non-modeled shifts in the economic environment, we find that
all fundamentals are highly significant in at least one regime and, moreover, obtain a good
fit. The model identifies two very persistent regimes characterized by a ‘low’, respectively,
‘high’ dividend-price ratio.
Keywords: Dividend-price ration; Stocks; Denmark
JEL-codes: G19
39 pages, July 12, 2001
Full text files
7556
- Copenhagen Business School, Department of Economics
- Ordering Working Papers
- Home page for this series
Questions (including download problems) about the papers in this series should be directed to Lars Nondal ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:cbsnow:2000_012This page generated on 2025-02-11 04:36:03.