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The short and long-term interdependencies between stock prices and dividends:  A panel vector error correction approach

This paper examines the short and long-term interdependencies between stock prices and dividends. I utilize firm level data from FTSE ALL SHARE from 1990-2014 and apply panel vector error correction model estimated with Engle & Grangers (1987) two-step procedure. The results show that there is a bi-directional long-term relationship between stock prices and dividends, i.e. an adjustment process is at work when a disequilibrium occurs. I also find a bi-directional short-term relationship. This paper also shows that Lintners model and the present value model are relevant frameworks in stock valuations.

Identiferoai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-255666
Date January 2015
CreatorsPersson, Rickard
PublisherUppsala universitet, Företagsekonomiska institutionen
Source SetsDiVA Archive at Upsalla University
LanguageEnglish
Detected LanguageEnglish
TypeStudent thesis, info:eu-repo/semantics/bachelorThesis, text
Formatapplication/pdf
Rightsinfo:eu-repo/semantics/openAccess

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