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Synopsis
Excerpt from Dividend Behavior for the Aggregate Stock Market
In a series of stimulating papers (198la, l98lb, and Robert Shiller uses seemingly powerful variance bounds tests to show that variations in aggregate stock market prices are much too large to be justified by the variation in subsequent dividend payments. Under the assumption that the real expected return on the market remains essentially constant over time, Shiller concludes that the excess variation in stock prices identified in his tests provides strong evidence to reject the Efficient Market Hypothesis. Even if the real expected return on the market does change over time, Shiller further concludes that the amount of variation in that rate necessary to save the Efficient Market Hypothesis is so large that the measured excess variation in stock prices cannot be attributed to this source.
We need hardly mention the significance of such a conclusion. If Shiller's rejection of market efficiency is sustained, then serious doubt is cast on the validity of the most important cornerstone of modern financial economic theory. To be sure, of the hundreds of earlier tests of efficient markets, there have been a few which appear to reject market efficiency [cf.
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About the Author
Robert C. Merton is George Fisher Baker, Professor of Business Administration, Harvard University.
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- PublisherForgotten Books
- Publication date2020
- ISBN 10 1330279522
- ISBN 13 9781330279526
- BindingPaperback
- LanguageEnglish
- Number of pages95
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Dividend Behavior for the Aggregate Stock Market (Classic Reprint)
Print on DemandSeller: Forgotten Books, London, United Kingdom
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Paperback. Condition: New. Print on Demand. This book investigates whether market prices in stock markets are too volatile to be rational and justifiable by the subsequent dividend payments. The author challenges prevailing theories in economics by presenting a liquidity-driven model that demonstrates that the volatility is justifiable in an efficient market. The author first overviews the fundamentals of stock market behaviour and dividend distribution from a historical standpoint. They then provide a detailed account of how liquidity risk can cause volatility beyond what would be expected by dividends alone. The author argues that standard models used to justify market efficiency oversimplify the dynamics of price formation and do not account for the way liquidity interacts with the cash flows from dividends. Presenting a detailed analysis of price and dividend behaviour between 1926â"1981, they show that market price is a rational predictor of future dividend payments, and that observed volatility is consistent with market efficiency. This book is a reproduction of an important historical work, digitally reconstructed using state-of-the-art technology to preserve the original format. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in the book. print-on-demand item. Seller Inventory # 9781330279526_0
Quantity: Over 20 available
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Dividend Behavior for the Aggregate Stock Market Classic Reprint
Seller: PBShop.store US, Wood Dale, IL, U.S.A.
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PAP. Condition: New. New Book. Shipped from UK. Established seller since 2000. Seller Inventory # LW-9781330279526
Quantity: 15 available
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Dividend Behavior for the Aggregate Stock Market Classic Reprint
Seller: PBShop.store UK, Fairford, GLOS, United Kingdom
Seller rating 5 out of 5 stars
PAP. Condition: New. New Book. Shipped from UK. Established seller since 2000. Seller Inventory # LW-9781330279526
Quantity: 15 available