Dividend Growth Rates Research Articles

PENGARUH RASIO LIQUIDITAS, RASIO LEVERAGE DAN RASIO AKTIVITAS TERHADAP PERTUMBUHAN LABA, STUDY EMPIRIS PADA PERUSAHAAN MANUFAKTUR BARANG KONSUMSI YANG TERDAFTAR DI BURSA EFEK INDONESIA

Abdonsius Sitanggang SE, MSi, Akt, This study aimed to examine the effect of Return on Equities (ROE), Debt to Equity Ratio (DER), the Net Book Value (NBV), Dividend Payout Ratio (DPR), Dividend Growth (GTH), the expected rate of return (KSS) to price stock, and examine what factors are the most dominant influence stock prices companies listed in Indonesia Stock Exchange.
 
 The samples were Manufacturing companies listed in Indonesia Stock Exchange in 2004-2006. Models of research and analysis of data using multiple linear regression models. The results are consistent with the hypothesis and is consistent with results of previous studies in which the return of equity (ROE), debt-to-equity ratio (DER), the book value (NBV), the dividend payout ratio (DPR), the growth rate of dividends (GTH), the rate of profit or risk-free profits implied (KSS) is lacking simultaneous significant effect on stock prices companies listed in Indonesia Stock Exchange. ROE, DER, NBV, the House of Representatives, GTH and KSS partially significant effect on the price of separation. The results of stock market price analysis (CLP) has a positive relationship with equity returns (ROE), book value of shares (NBV), the dividend payout ratio (DPR) and the growth rate of dividends (GTH). Instead the market price of the stock (CLP) has a negative relationship with debt to equity ratio (DER) and the risk-free profits or gains implied (KSS). The most dominant factors influence stock prices, companies listed on the Indonesia Stock Exchange is the book value of the stock.

PENGARUH BEBERAPA RASIO KEUANGAN TERHADAP HARGA SAHAM, STUDI EMPIRIS PADA PERUSAHAAN MANUFAKTUR YANG TERDAFTAR DI BURSA EFEK INDONESIA

This study aimed to examine the effect of Return on Equities (ROE), Debt to Equity Ratio (DER), the Net Book Value (NBV), Dividend Payout Ratio (DPR), Dividend Growth (GTH), the expected rate of return (KSS) to price stock, and examine what factors are the most dominant influence stock prices companies listed in Indonesia Stock Exchange.
 The samples were Manufacturing companies listed in Indonesia Stock Exchange in 2004-2006. Models of research and analysis of data using multiple linear regression models. The results are consistent with the hypothesis and is consistent with results of previous studies in which the return of equity (ROE), debt-to-equity ratio (DER), the book value (NBV), the dividend payout ratio (DPR), the growth rate of dividends (GTH), the rate of profit or risk-free profits implied (KSS) is lacking simultaneous significant effect on stock prices companies listed in Indonesia Stock Exchange. ROE, DER, NBV, the House of Representatives, GTH and KSS partially significant effect on the price of separation. The results of stock market price analysis (CLP) has a positive relationship with equity returns (ROE), book value of shares (NBV), the dividend payout ratio (DPR) and the growth rate of dividends (GTH). Instead the market price of the stock (CLP) has a negative relationship with debt to equity ratio (DER) and the risk-free profits or gains implied (KSS). The most dominant factors influence stock prices, companies listed on the Indonesia Stock Exchange is the book value of the stock.

배당수익률의 시장수익률 및 배당성장률 예측성: 아시아 선진 시장을 중심으로

배당수익률의 시장수익률 및 배당성장률 예측성: 아시아 선진 시장을 중심으로

Regime Shifts in Price‐Dividend Ratios and Expected Stock Returns: A Present‐Value Approach

We incorporate regime shifts in the mean of price‐dividend ratios into the present value model of van Binsbergen and Koijen (2010) who propose a latent variable approach to modeling expected returns and dividend growth rates. We find that accounting for regime shifts results in much lower persistence of expected returns and higher volatility of expected returns, and thus higher in‐sample predictability, when compared to the results from the van Binsbergen and Koijen (2010) model. We also show that the main source of the increase in the mean of price‐dividend ratios in the mid‐1990s is a decrease in the mean of expected returns.

Noisy information and stock market returns

PurposeThis paper aims to study whether noisy public information that investors receive about the expected aggregate dividend growth rate can help better understand the large average equity premium and stock return volatility in the US financial market.Design/methodology/approachThis paper considers a dynamic asset pricing model with a representative agent, who cannot observe the expected growth rate of dividends and must learn its value by using noisy information. In addition, this paper presents a simple model for noisy information calibration.FindingsWith a coefficient of relative risk aversion below 10 and the time impatience parameter between 0 and 1, the calibrated model is able to yield an average risk-free interest rate, equity premium and stock return volatility that are close to the stylized facts in the US financial market.Originality/valueFirst, this paper presents a different equilibrium model with a simple “catching up with the Joneses” preference and noisy information. Second, this paper develops a simple calibration procedure to calibrate the information process to study whether the calibrated model can help explain the large average equity premium and stock return volatility in the US financial market data.

Funding Shortfall Risk and Asset Prices in General Equilibrium

Institutional investors, such as pensions and insurers, are typically constrained to hold enough wealth to be able to make their contractually promised payments to fund beneficiaries. This creates an additional risk in the economy, namely the risk of funding-shortfall. We seek to explore the optimal asset allocation strategies for institutions facing this risk, and its effects on asset prices. The constraint introduces two distinct regions in the economy, characterising unconstrained and constrained regions, with the possibility of transitioning from the constrained to unconstrained regime, which leads to a two-factor asset pricing model. The funding-shortfall risk increases the conditional equity premium and Sharpe ratio, which evolve counter-cyclically, but decreases the conditional volatility of equity returns, which evolves cyclically. The constrained institution may optimally an under-diversified portfolio, and simultaneously increases its demand for the riskfree and higher-risk assets relative to medium-risk assets, inducing a bubble-like behaviour in the prices of higher-risk assets. The dynamics of contractually promised payments affect the dynamics of conditional moments of asset return distributions, and may lead to predictability. The term structure of interest rates is predominantly upward sloping, but can change shape upon shocks to the growth rate of aggregate dividend relative to the growth rate of minimum payouts. Implied volatility exhibits a time-varying volatility smile, and the term structure of implied volatility can be both upward or downward sloping, depending on the relative growth rates of aggregate dividends and promised institutional payouts. These results may have implications for the design of optimal regulatory requirements.

Solving the Equity Risk Premium Puzzle and Inching Towards a Theory of Everything -- Visual Version

The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a few attempts done over the years to explain this anomaly:1. Inclusion of highly unlikely events with low probability (Ugly state along with Good and Bad), or market crashes, recently also termed as Black Swans.2. Slow moving habit, or time-varying subsistence level, added to the basic power utility function.3. Allowing for a separation of the inter-temporal elasticity of substitution and risk aversion, combined with consumption and dividend growth rates modeled as containing a small persistent expected growth rate component and a fluctuating volatility which captures time varying economic uncertainty.We explore whether a fusion of the above approaches supplemented with better methods to handle the below reservations would provide a more realistic and yet tractable framework to tackle the various conundrums in the social sciences:1. Unlimited ability of individuals to invest as compared to their ability to consume.2. Lack of an objective measuring stick of value which gives rise to heterogeneous preferences and beliefs.3. Unintended consequences due to the dynamic nature of social systems, where changes can be observed and decisions effected by participants to influence the system.4. Relaxation of the transversality condition to avoid the formation of asset price bubbles.5. How durable is durable? Since nothing lasts forever, accounting for durable goods to create a comprehensive measure of consumption volatility .The world we live in produces fascinating phenomenon despite (or perhaps, due to) being a hotchpotch of varying doses of the above elements. The rationale for a unified theory is that beauty can emerge from chaos since the best test for a stew is its taste.

Recovering the Market Risk Premium from Stock and Option Prices

We …nd that the estimation of the market expected return bene…ts signi…cantly from enriching the information set we use, with increasingly …ner detail regarding the shape of the physical and risk-neutral distributions and the shape discrepancy between the two. Assuming the existence of a monotonic projected pricing kernel we extend Duan and Zhang’s (2014) theoretical model to a general system of equations that relates physical cumulants of any order to risk-neutral ones through the projected relative risk aversion coe¢ cient. Using stock and option data from the S&P 500 index we employ our general speci…cation to estimate the ex-ante market risk premium for the period 2001-2010 in a monthly frequency. The empirical results strongly support our hypothesis both in a statistical sense and in the context of the present value identity that associates dividend-price ratio to expected returns and dividend growth rates.

Solving the Equity Risk Premium Puzzle and Inching Towards a Theory of Everything

The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a few attempts done over the years to explain this anomaly:1. Inclusion of highly unlikely events with low probability (Ugly state along with Good and Bad), or market crashes, recently also termed as Black Swans.2. Slow moving habit, or time-varying subsistence level, added to the basic power utility function.3. Allowing for a separation of the inter-temporal elasticity of substitution and risk aversion, combined with consumption and dividend growth rates modeled as containing a small persistent expected growth rate component and a fluctuating volatility which captures time varying economic uncertainty.We explore whether a fusion of the above approaches supplemented with better methods to handle the below reservations would provide a more realistic and yet tractable framework to tackle the various conundrums in the social sciences:1. Unlimited ability of individuals to invest as compared to their ability to consume.2. Lack of an objective measuring stick of value which gives rise to heterogeneous preferences and beliefs.3. Unintended consequences due to the dynamic nature of social systems, where changes can be observed and decisions effected by participants to influence the system.4. Relaxation of the transversality condition to avoid the formation of asset price bubbles.5. How durable is durable? Since nothing lasts forever, accounting for durable goods to create a comprehensive measure of consumption volatility.The world we live in produces fascinating phenomenon despite (or perhaps, due to) being a hotchpotch of varying doses of the above elements. The rationale for a unified theory is that beauty can emerge from chaos since the best test for a stew is its taste. Many long standing puzzles seem to have been resolved using different techniques. The various explanations need to stand the test of time before acceptance; but then unexpected outcomes set in and new puzzles emerge. As real analysis and limits tell us: we are getting Closer and Closer; Yet it seems we are still Far Far Away...

The St. Petersburg paradox and capital asset pricing

Durand (J Finance 12:348–363, 1957) shows that the classical St. Petersburg paradox can apply to the valuation of a firm whose dividends grow at a constant rate forever. To capture a more realistic pattern of dividends, we model the dividend growth rate as a mean reverting process, and then use the capital asset pricing model to derive the risk-adjusted present value. The model generates an equivalent St. Petersburg game. The long-run growth rate of the payoffs (dividends) is dominant in driving the value of the game (firm), and the condition under which the value is finite is less restrictive than that of the standard game.

Learning to smile: Can rational learning explain predictable dynamics in the implied volatility surface?

We develop a general equilibrium asset pricing model under incomplete information and rational learning in order to understand the unexplained predictability of option prices. In our model, the fundamental dividend growth rate is unknown and subject to breaks. Immediately after a break, there is insufficient information to price option contracts accurately. However, as new information arrives, a representative Bayesian agent recursively learns about the parameters of the process followed by fundamentals. We show that learning makes beliefs time-varying and generates predictability patterns across option contracts with different strike prices and maturities; as a result, the implied movements in the implied volatility surface resemble those observed empirically.

The Reaction of Stock Returns to News About Fundamentals

In good times, stock prices react negatively to good news and positively to bad news, whereas in bad times, they react positively to good news and negatively to bad news. To account for this stylized fact, we consider an asset pricing model where the dividend growth rate switches between different values depending on the underlying state of the economy. Investors never observe the true dividend growth rate, but learn about it through not only its realizations but also external signals such as macroeconomic indicators. Under plausible assumptions, the differing precision of external signals across different states of the economy can change the sign of the market reaction to news from external signals in good and bad times. This paper was accepted by Brad Barber, finance.

Understanding Cross‐Country Differences in Valuation Ratios: A Variance Decomposition Approach

AbstractWe use a variance decomposition approach to examine why aggregate valuation ratios differ across countries. In a cross section of 22 developed countries from 1980 to 2009, we find that 50 percent of all cross‐country differences in the aggregate price‐to‐book ratio (P/B) can be explained by cross‐country differences in expected future five‐year profitability. In the second half of our sample period, this percentage exceeds that of the first half, rising to almost 64 percent. Although international differences in accounting standards and conventions may have made earnings from different countries more difficult to compare relative to dividends, we find that it is still cross‐country differences in expected future profitability, rather than dividend growth rates, that are more closely related to international differences in valuation ratios. Even among 25 emerging markets, we find that expected future profitability at the five‐year horizon can account for 29 percent of all cross‐country P/B variations. Our results show that international investors are able to identify substantial cross‐country differences in future‐earnings prospects and incorporate them into stock market valuations.

Stock return and cash flow predictability: The role of volatility risk

We examine the joint predictability of return and cash flow within a present value framework, by imposing the implications from a long-run risk model that allow for both time-varying volatility and volatility uncertainty. We provide new evidence that the expected return variation and the variance risk premium positively forecast both short-horizon returns and dividend growth rates. We also confirm that dividend yield positively forecasts long-horizon returns, but that it does not help in forecasting dividend growth rates. Our equilibrium-based “structural” factor GARCH model permits much more accurate inference than univariate regression procedures traditionally employed in the literature. The model also allows for the direct estimation of the underlying economic mechanisms, including a new volatility leverage effect, the persistence of the latent long-run growth component and the two latent volatility factors, as well as the contemporaneous impacts of the underlying “structural” shocks.

A comparison of alternative models for estimating firm’s growth rate

The growth rate plays an important role in determining a firm’s asset and equity values, nevertheless the basic assumptions of the growth rate estimation model are less well understood. In this paper, we demonstrate that the model makes strong assumptions regarding the financing mix of the firm. In addition, we discuss various methods to estimate firms’ growth rate, including arithmetic average method, geometric average method, compound-sum method, continuous regression method, discrete regression method, and inferred method. We demonstrate that the arithmetic average method is very sensitive to extreme observations, and the regression methods yield similar but somewhat smaller estimates of the growth rate compared to the compound-sum method. Interestingly, the ex-post forecast shows that arithmetic average method (compound-sum method) yields the best (worst) performance with respect to estimating firm’s future dividend growth rate. Firm characteristics, like size, book-to-market ratio, and systematic risk, have significant influence on the forecast errors of dividend and sales growth rate estimation.

Dynamic Agency, Delegated Portfolio Management and Asset Pricing

We study a dynamic contracting problem in continuous-time dynamically complete market general equilibrium, whereby an investor must delegate all his portfolio choice problems to a manager. This framework is one of the first attempts to attack a combined dynamic contracting and dynamic asset pricing problem. The portfolio manager can exert costly private monitoring effort costs to increase the expected dividend growth rate of a representative firm. The investor can only observe the dividends of the firm over time, and will consider a pie sharing rule contract over the dividends of consumption goods to dynamically incentivize the manager. The key result is that dynamic moral hazard and dynamic optimal contracting endogenously generates stochastic volatility in the asset returns, and substantial state varying stochasticity in the market price of risk and the risk free rate; this is in sharp contrast to an economy without the presence of agency and dynamic contracts where the market price of risk, risk free rate and asset volatility are all constant. Our results raise the question whether a traditionally viewed "idiosyncratic" risk, namely incentives and compensation contracts of fund managers, are priced in that they do affect asset pricing in equilibrium.

Expected Returns and Dividend Growth Rates Implied by Derivative Markets

Expected Returns and Dividend Growth Rates Implied by Derivative Markets

Two Trees with Heterogeneous Beliefs: Spillover Effect of Disagreement

We study a model in which two groups of investors have different beliefs about the expected dividend growth rates of two stocks. The state price density is affected by investor disagreements for both stocks, especially that for the larger stock. The model predicts a positive relation between investor disagreement about one stock and the expected return as well as return volatility of the other stock, even when the fundamentals of two stocks are uncorrelated. This spillover effect is stronger from a large stock to a small stock than vice versa. These novel model implications are supported by empirical analysis.

Feedback Trading between Fundamental and Nonfundamental Information

We develop a strategic trading model in which an insider exploits noise traders' overreaction. A feedback effect arises from the insider's trading on fundamental information (the expected growth rate of dividends) and nonfundamental information (insider's inventory or noise supply). We find that the stock price is not fully revealing; a faster mean-reverting noise supply leads to a more volatile price; the price impact can increase with insider's risk-aversion; and a risk-averse insider can trade more aggressively on fundamental information than a risk-neutral one does. Insider's current trade and his previous inventory exhibit simultaneously positive forecasting powers for future stock returns.

Supply and Demand Shocks in the Oil Market and their Predictive Power

This paper identifies supply and demand shocks that are specific to the oil-market, and separates them from economy-wide shocks that affect the demand for many asset classes, including oil. The shocks are identified by the sign and magnitude of the correlation between daily oil price percent changes and the aggregate stock market total returns, excluding internationally diversified oil companies. Shocks that are specific to the oil market - prominently due to geopolitical events in the Middle East or changes in the expectations thereof - are identified as inducing a negative contemporaneous correlation between oil price changes and stock market returns. On the other hand, economy-wide shocks - prominently due to unexpected global economic booms or busts - are identified as inducing a positive correlation. The paper employs a reduced-form methodology to show empirical evidence regarding the macroeconomic effects of these shocks on the future realizations of the US stock market excess return, dividend growth rate, and real GDP growth rate. Intuitively, the effects are of opposite sign depending on whether the oil-price change originated from an oil-market-specific or from an economy-wide shock. I show these shocks also have predictive power over future realizations of the spot-oil price change and oil futures excess return.