PhD in Finance, Yale School of Management
Research Interest: Asset Pricing, Behavioral Finance
Abstract: The prices of dividends at alternative horizons contain critical information on the behavior of aggregate stock market. The ratio between prices of long- and short-term dividends, “price ratio” (prt), predicts annual market return with an out-of-sample R2 of 19%. prt subsumes the predictive power of traditional price-dividend ratio (pdt). After orthogonalized to prt, the residuals of pdt strongly predict dividend growth. Using an exponential-affine model, we show that the key to our findings is the (lack of) persistence of expected dividend growth. Moreover, we find that return predictability is stronger after market downturns, and holds outside the U.S. As an economic test, shocks to prt are priced in the cross-section of stocks, consistent with ICAPM. Our measure of expected return declines during monetary expansions, and varies strongly with the conditions of macroeconomy, financial intermediaries, and sentiment.
Presentations: LBS TADC, Yale Finance PhD Seminar, FMA (scheduled), French Finance Association (scheduled)