Intrinsic Bubbles in Stock Prices Under Persistent Dividend Growth Rates

2019 ◽  
Author(s):  
Faisal M. Awwal ◽  
Prasad V. Bidarkota
Keyword(s):  
Growth Rates ◽  
Stock Prices ◽  
Dividend Growth

scholarly journals Interrelationships among Growth, Confidence and Governance in the Globalized World-An experiment of some selected countries

2014 ◽  
Vol 3 (4) ◽  
pp. 68-83
Author(s):  
Ramesh Das ◽  
Utpal Das
Keyword(s):  
Growth Factors ◽  
Growth Rates ◽  
Stock Prices ◽  
Causal Relation ◽  
Economic Factors ◽  
Debt Ratio ◽  
Individual Country ◽  
Confidence Levels ◽  
The World ◽  
The Individual

The countries in the world in the globalized era have faced heterogeneity in challenges in managing their growth factors as well as the stake holders of such growth profiles. The political and economic turmoil of the last two decades around the world have opened the eyes of the consumers, business houses and the governments of different countries to read and follow the economic events. The paper has tried to study the causal relation and interrelationships among different growth factors like the confidence levels of the consumers and business houses, inflation, unemployment like economic factors and governance like non-economic factors over a selection of 17 countries across all continents for the period 1996-2010. Because of limited sources of data we have applied the pooled regression technique to justify our study. Confidence levels of both the consumers and business houses cause the growth rates whereas governance causes growth only under pooled data. But for individual country data we observe that in majority of the countries there are absences of causalities between the variables. It has been observed that pooled annual growth rates of GDP of the countries are significantly related to the business and consumer confidence indexes, unemployment rate, debt ratio and overall governance indicators that shows improvement over the individual country analysis where in majority of the cases there is no significant factor for growth and confidence. By segregating the entire data the study find a few countries where a few variables like BCI, stock prices and governance make significant impact upon growth rates. In majority of the countries BCI is explained by CCI, Stock prices and governance while CCI is explained by stock prices, governance and debt ratio.

scholarly journals The effects of economic policy uncertainty on stock market returns: Evidence from Brazil

2021 ◽  
Vol 19 (3) ◽  
pp. 53-84
Author(s):  
Cristiane Gea ◽  
Luciano Vereda ◽  
Antonio Carlos Figueiredo Pinto ◽  
Marcelo Cabus Klotzle
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Stock Returns ◽  
Growth Rates ◽  
Policy Uncertainty ◽  
Stock Market Returns ◽  
Economic Policy Uncertainty ◽  
Future Performance ◽  
Excess Stock Returns ◽  
Dividend Growth

This article investigates the effects of economic policy uncertainty on the Brazilian stock market. We link excess returns and dividend growth rates to the economic policy uncertainty index of Baker et al. (2016) and other control variables. In recent years, Brazil has experienced political tensions, which affected its economic policy. Therefore, this country is the most suitable environment to test the hypothesis that this measure of economic policy uncertainty has an informational content not wholly reflected in the usual constructs of economic uncertainty and economic distress. Our results show that economic policy uncertainty (i) correlates negatively with current excess stock returns; (ii) correlates positively with future excess stock returns, showing itself to be a good predictor of future performance of the stock market; (iii) is not significantly related to future dividend growth rates; and (iv) anticipates changes in discount rates.

scholarly journals Value and growth stocks and shareholder value creation in Brazil

2019 ◽  
Vol 26 (3) ◽  
pp. 293-312
Author(s):  
Lucas Nogueira Cabral de Vasconcelos ◽  
Orleans Silva Martins
Keyword(s):  
Growth Rates ◽  
Shareholder Value ◽  
Explanatory Power ◽  
Accounting Data ◽  
Content Type ◽  
Value Stocks ◽  
The Us ◽  
The Usa ◽  
Growth Stocks ◽  
Dividend Growth

Purpose Investors label high (low) book-to-market (B/M) firms as value (growth) companies. The conventional wisdom supports that growth stocks grow faster than the value ones, creating greater shareholder value. The Purpose of this paper is to analyze how stocks of growth and value companies create value for their shareholders in Brazil, compared to the USA market. For this, the authors analyze three dimensions of return. Design/methodology/approach First, the authors perform portfolios to analyze the growth rates of shareholders’ return. Then, the authors perform regressions to study the explanatory power of the B/M in growth. The data come from Thomson Reuters Eikon database and the Brazilian Institute of Geography and Statistics. The authors select all non-financial firms with available data from 1997 to 2017. Findings The profitability of growth firms is higher than the value ones, in almost every year after the portfolios’ formation, with little variation. Contrary to the findings for the US market, growth companies in Brazil show higher dividend growth than value companies. Research limitations/implications It is possible that the database does not contain complete and entirely reliable accounting data, which may partially affect the results. Practical implications The findings contradict those exposed in the USA. The implications are the inverse of the US study: the duration-based explanation could be a vital factor for the value premium in the Brazilian stock market. Also, the findings support the standard valuation techniques and help the growth rates estimation in the valuation process (top-down approach). Originality/value This study is the first to compare the profitability and dividend growth of growth/value stocks in the Brazilian market. Overall, growth stocks have considerable profitability, and dividend growth compared to value stocks.

Mutual benefits of transferring stock risks to dividend policy

2014 ◽  
Vol 30 (2) ◽  
pp. 131-158 ◽  
Author(s):  
Tarek Ibrahim Eldomiaty ◽  
Ola Atia ◽  
Ahmad Badawy ◽  
Hassan Hafez
Keyword(s):  
Stock Returns ◽  
Growth Rates ◽  
Explanatory Power ◽  
Mathematical Structure ◽  
Percentage Change ◽  
Practical Consideration ◽  
Content Type ◽  
Risk Transfer ◽  
Potential Benefits ◽  
Dividend Growth

Purpose – The literature on the relation between dividends and stock risks include mixed results. The related studies have reached either insignificant, or positive, or negative results. The authors offer a mathematical structure that addresses potential mutual benefits of dividends signaling under conditions of stock risks (systematic and unsystematic). The mathematical structure demonstrates explicitly a case of risk transfer. The purpose of this paper is to examine the potential benefits to firms and stockholders when financial managers adjust dividends per share (DPS) using percentage change in the explanatory power of systematic and unsystematic risks. This perspective is derived from a practical consideration that dividends are part of stock returns that can be adjusted to take stock risks into account. Design/methodology/approach – The paper utilizes the specifications of the two-stage (simultaneous) regression and partial adjustment model. The sample includes quarterly data for firms listed in the Dow Jones Industrial Average and NASDAQ for the period December 31, 1989-March 31, 2011. Findings – The authors have reached general results based on hypotheses developed from related literature. The results show that: first, benefits of risk transfer can be realized. That is, firms as well as stockholders achieve benefits when the DPS are adjusted using percentage change in the explanatory power of systematic risk only; second, dividend growth rates are affected positively by changes in systematic risks; third, the highest stock returns in the market are reached with sharp decreases in dividend growth rates; fourth, in the highest returns quartile, firm size and time do not matter but the industry type does; and fifth, the associations between dividend growth rates, systematic, unsystematic risks, and stock returns are intrinsically nonlinear. Originality/value – The study contributes to the literature in terms of first, providing practical insights on the financial strategies that help in the use of dividends to convey the right signals to stockholders, and second, empirically show the potential benefits of adjusting dividends growth rates according to systematic and unsystematic stock risks in a unified mathematical structure that adds to the current literature.

Evaluating Predictors within a Present-Value Framework

2013 ◽  
Vol 03 (02) ◽  
pp. 1350008 ◽  
Author(s):  
Jhe Yun
Keyword(s):  
Growth Rates ◽  
Small Sample ◽  
Corporate Bond ◽  
Expected Returns ◽  
Present Value ◽  
Aggregate Information ◽  
Bond Yield ◽  
Out Of Sample ◽  
Book To Market Ratio ◽  
Dividend Growth

I impose functional-form restrictions on the time-series processes of expected returns and expected dividend growth rates to better estimate them in a small sample. The approach helps to aggregate information contained in the entire history of prices, dividend growth, and additional predictors without parameter proliferation. I find that both expected returns and expected dividend growth rates are substantially time-varying, positively correlated with each other, and covary with several macroeconomic variables. The estimated expectations of returns and dividend growth rates are strong predictors of realized returns and dividend growth rates, respectively, both in-sample and out-of-sample. Book-to-Market Ratio, Stock Variance, Consumption-Wealth-Income Ratio, and BAA-rated Corporate Bond Yield significantly improve the return and dividend forecasts of my present-value model.

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