A Variance Decomposition for Stock Returns
Bibliographic Data
| ID | 9716948 |
|---|---|
| Authors | John Y Campbell (National Bureau of Economic Research, corresponding author) |
| Year | 1991 |
| Volume | 101 |
| Issue | 405 |
| Pages | 157 |
| Publication date | 1991-03-01 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.2307/2233809 |
| OpenAlex | W2140584608 |
| Language | EN |
| Citations received | 23 |
| References cited | 2 |
This paper shows that unexpected stock returns must be associated with changes in expected future dividends or expected future returns A vector autoregressive method is used to break unexpected stock returns into these two components. In U.S. monthly data in 1927-88, one-third of the variance of unexpected returns is attributed to the variance of changing expected dividends, one-third to the variance of changing expected returns, and one-third to the covariance of the two components. Changing expected returns have a large effect on stock prices because they are persistent: a 1% innovation in the expected return is associated with a 4 or 5% capital loss. Changes in expected returns are negatively correlated with changes in expected dividends, increasing the stock market reaction to dividend news. In the period 1952-88, changing expected. returns account for a larger fraction of stock return variation than they do in the period 1927-51
Autoregressive model · Covariance · Dividend · Econometrics · Economics · Expected return · Financial economics · Portfolio · Statistics · Stock (firearms) · Stock market · Variance decomposition of forecast errors · Corporate Finance and Governance · Finance · Financial Markets and Investment Strategies · Housing Market and Economics · Mathematics
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| Unique citing works | 23 |
|---|---|
| Citations per year | 0,79 |
| Citation span | 1997 - 2023 (27) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 23 |