This book explains a detailed model of how dividends and prices behave over time, and why dividends can be forecasted from past data. It contrasts the authors’ approach with alternative theories and shows how smoothing dividend paths can affect the volatility of prices.

Two clear sections lay out theory and evidence. The first builds a rational model of prices and dividends that aims to match observed market behavior. The second compares this model to other explanations, including Shiller’s perspective, and tests it with real data. The result is a grounded look at what drives long-run stock returns and how analysts think about risk and return.

How dividends and price changes interact to determine total returns
Why some models predict higher or lower market volatility
How smoothing of dividends by managers may influence observed outcomes
Evidence from time-series analyses and the role of autoregressive behavior

Ideal for readers seeking a rigorous, data-informed view of stock returns, risk, and the mechanics behind dividend policy.

About the Author

Robert C. Merton is George Fisher Baker, Professor of Business Administration, Harvard University.

"About this title" may belong to another edition of this title.

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