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Price dividend ratio and long-run stock returns: a score driven state space model
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| Authors and Corporations: | , , |
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| Title: | Price dividend ratio and long-run stock returns: a score driven state space model/ Davide Delle Monache, Ivan Petrella, Fabrizio Venditti |
| Type of Resource: | E-Book |
| Language: | English |
| published: |
Frankfurt am Main, Germany
European Central Bank
[2020]
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| Series: |
Europäische Zentralbank: Working paper series ; no 2369 (February 2020)
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| Source: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Abstract: | In this paper we develop a general framework to analyze state space models with timevarying system matrices where time variation is driven by the score of the conditional likelihood. We derive a new filter that allows for the simultaneous estimation of the state vector and of the time-varying parameters. We use this method to study the timevarying relationship between the price dividend ratio, expected stock returns and expected dividend growth in the US since 1880. We find a significant increase in the long-run equilibrium value of the price dividend ratio over time, associated with a fall in the longrun expected rate of return on stocks. The latter can be attributed mainly to a decrease in the natural rate of interest, as the long-run risk premium has only slightly fallen. |
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| Physical Description: | 1 Online-Ressource (circa 83 Seiten); Illustrationen |
| ISBN: |
9789289940122
9289940123 |
| DOI: | 10.2866/699185 |