Discount rates and cash flows: A local projection approach

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2024-03-07
Major/Subject
Mcode
Degree programme
Language
en
Pages
18
Series
JOURNAL OF BANKING AND FINANCE, Volume 162
Abstract
We develop flexible local projections to quantify the relative contributions of expected discount rates and cash flows to the variation of dividend yields. Local projections enable the incorporation of large information sets, the use of monthly data along with annual data, and the consideration of time variation in the dividend yield decomposition. By expanding the set of state variables and allowing for time-varying parameters, our results show that the variation of expected discount rates remains the primary contributor to market volatility, whereas the contribution of expected cash flows is considerably smaller.
Description
Publisher Copyright: © 2024 The Author(s)
Keywords
Decomposition, Dividend growth, Dividend yield, Local projections
Other note
Citation
Lof, M & Nyberg, H 2024, ' Discount rates and cash flows: A local projection approach ', JOURNAL OF BANKING AND FINANCE, vol. 162, 107127 . https://doi.org/10.1016/j.jbankfin.2024.107127