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Nonlinearity in the stock price-dividend relation

Kanas, Angelos (2005) Nonlinearity in the stock price-dividend relation. Journal of International Money and Finance, 24 (4). pp. 583-606. ISSN 0261-5606. (doi:10.1016/j.jimonfin.2005.03.003) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1016/j.jimonfin.2005.03.003

Abstract

We provide empirical evidence of nonlinearities in the present value (PV) model of stock prices. We test for nonlinearity both in the contemporaneous and in the dynamic stock price-dividend relation for the UK, the US, Japan, and Germany. We employed three nonlinear nonparametric techniques, namely nonlinear cointegration, locally-weighted regression, and nonlinear Granger causality tests. Whilst there is no evidence of linear cointegration and Granger causality for any country, there is significant evidence of nonlinear cointegration and nonlinear Granger causality for all four countries. Furthermore, out-of-sample forecasts obtained from the locally-weighted regression are more accurate than out-of-sample forecasts obtained from the linear model for the UK, the US, and Japan. These results are robust to sub-period analysis. The results are in line with empirical evidence that expected stock returns are time-varying. © 2005 Elsevier Ltd. All rights reserved.

Item Type: Article
DOI/Identification number: 10.1016/j.jimonfin.2005.03.003
Additional information: Unmapped bibliographic data: AD - Department of Economics, University of Crete, 74100 Rethymnon, Crete, Greece [Field not mapped to EPrints] JA - J. Int. Money Financ. [Field not mapped to EPrints]
Uncontrolled keywords: Dividends, Locally-weighted regression, Nonlinear cointegration, Nonlinear Granger causality, Present value model, Stock prices
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Tracey Pemble
Date Deposited: 22 May 2014 14:01 UTC
Last Modified: 11 Jun 2019 09:29 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/41149 (The current URI for this page, for reference purposes)
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