Price dividend ratio and long-run stock returns: A score driven state space model

Arbeitspapier

In this paper we develop a general framework to analyze state space models with timevarying system matrices where time variation is driven by the score of the conditional likelihood. We derive a new filter that allows for the simultaneous estimation of the state vector and of the time-varying parameters. We use this method to study the timevarying relationship between the price dividend ratio, expected stock returns and expected dividend growth in the US since 1880. We find a significant increase in the long-run equilibrium value of the price dividend ratio over time, associated with a fall in the longrun expected rate of return on stocks. The latter can be attributed mainly to a decrease in the natural rate of interest, as the long-run risk premium has only slightly fallen.

Angaben zum Objekt

• ISBN: 978-92-899-4012-2
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECB Working Paper ; No. 2369

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Construction and Estimation ; Forecasting Models; Simulation Methods ; Price Level; Inflation; Deflation
• Thema: State space models ; time-varying parameters ; score-driven models ; equitypremium ; present-value models

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Delle Monache, Davide ; Petrella, Ivan ; Venditti, Fabrizio
• Ereignis: Veröffentlichung
• (wer): European Central Bank (ECB)
• (wo): Frankfurt a. M.
• (wann): 2020

Weitere Informationen

• DOI: doi:10.2866/699185
• Handle: http://hdl.handle.net/10419/228983
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ