• Corpus ID: 50416699

North-Holland DIVIDEND YIE [ 2 DS AND EXPECIED ST ( KX RETURNS *

@inproceedings{French2002NorthHollandDY,
  title={North-Holland DIVIDEND YIE [ 2 DS AND EXPECIED ST ( KX RETURNS *},
  author={Kenneth R. French},
  year={2002}
}

• K. French
• Published 2002
• Economics, Business

The power of dividend yields to fol~.-cast s'~ck returns, measured by regression R 2, inrA-eases with the return horizon. We offer a two-part explnnatio~. (1) ]-Iieh at~c}o~rfe]ation causes the variance of expected returns to grow faster than the return horizon. (2) The growth of the vari~ce of ,_me~cted returns with the return horizon is attenuated by a discount-rate effectshocks to expected returns generate opposite shocks to current prices. We estimate that, on average, the future price increases implied by hl. . l~ ~ 0 e ~ ' ~ returns ~e just offset by the decline in the current price. Thus, time-varying expected returns generate 'temporary' components of prices.