Forecasting dividend growth: The role of adjusted earnings yield

Yu, D; Huang, D; Chen, L; Li, L

Forecasting dividend growth: The role of adjusted earnings yield

Yu, D Huang, D

Chen, L Li, L

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Publisher:: Elsevier
Publication Type:: Journal Article
Citation:: Economic Modelling, 2023, 120, pp. 106188
Issue Date:: 2023-03-01

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Field	Value	Language
dc.contributor.author	Yu, D
dc.contributor.author	Huang, D https://orcid.org/0000-0002-1159-3134
dc.contributor.author	Chen, L
dc.contributor.author	Li, L
dc.date.accessioned	2024-06-28T03:15:20Z
dc.date.available	2024-06-28T03:15:20Z
dc.date.issued	2023-03-01
dc.identifier.citation	Economic Modelling, 2023, 120, pp. 106188
dc.identifier.issn	0264-9993
dc.identifier.uri	http://hdl.handle.net/10453/179673
dc.description.abstract	This paper revisits the predictability of dividend growth. Motivated by the dividend partial adjustment model, we decompose the earnings yield into smoothing and residual components. The residual component reflects the variations in the forecast of dividend dynamics and thus forms a powerful predictor of dividend growth. Empirically, the proposed predictor shows significant in-sample predictive power for aggregate dividend growth at both monthly and annual frequencies over several forecast horizons. The regression results are robust to dividend reinvestment strategies and economic status. More importantly, the proposed predictor contains significant out-of-sample predictability, outperforming the historical mean benchmark and a list of popularly used financial and macroeconomic predictors in the literature.
dc.language	en
dc.publisher	Elsevier
dc.relation.ispartof	Economic Modelling
dc.relation.isbasedon	10.1016/j.econmod.2022.106188
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1402 Applied Economics, 1403 Econometrics, 1502 Banking, Finance and Investment
dc.subject.classification	Economics
dc.subject.classification	3502 Banking, finance and investment
dc.subject.classification	3801 Applied economics
dc.subject.classification	3802 Econometrics
dc.title	Forecasting dividend growth: The role of adjusted earnings yield
dc.type	Journal Article
utslib.citation.volume	120
utslib.for	1402 Applied Economics
utslib.for	1403 Econometrics
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Faculty of Business
pubs.organisational-group	University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	closed_access	*
dc.date.updated	2024-06-28T03:15:17Z
pubs.publication-status	Published
pubs.volume	120

Abstract:

This paper revisits the predictability of dividend growth. Motivated by the dividend partial adjustment model, we decompose the earnings yield into smoothing and residual components. The residual component reflects the variations in the forecast of dividend dynamics and thus forms a powerful predictor of dividend growth. Empirically, the proposed predictor shows significant in-sample predictive power for aggregate dividend growth at both monthly and annual frequencies over several forecast horizons. The regression results are robust to dividend reinvestment strategies and economic status. More importantly, the proposed predictor contains significant out-of-sample predictability, outperforming the historical mean benchmark and a list of popularly used financial and macroeconomic predictors in the literature.

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http://hdl.handle.net/10453/179673