Modeling the Dynamics between Stock Price and Dividend: An Endogenous Regime Switching Approach
2
조회
0
다운로드
0
인용
0
참고문헌
키워드
초록
This study considers a new error correction model (ECM) for stock price and dividend, which accommodates nonlinearities in both long- and short-run relationships. First, timevarying coefficient cointegration is adopted to explain the nonlinear long-run relationship between stock price and dividend. Second, the model allows for endogenous regime switching to describe the short-run relationship. The empirical application on the S&P 500 Index and dividend shows that our model fits the data significantly better than existing models and provides estimates with meaningful interpretations. In addition, the linear cointegration is unsuitable to describe the long-run relationship, and the ECM with endogenous regime switching better explains the data than that with conventional Markov switching. An extract latent factor specifically reveals the periods for each regime, and the periods of high-volatility regime include the NBER recession periods and certain periods of financial crisis.
Abstract
This study considers a new error correction model (ECM) for stock price and dividend, which accommodates nonlinearities in both long- and short-run relationships. First, timevarying coefficient cointegration is adopted to explain the nonlinear long-run relationship between stock price and dividend. Second, the model allows for endogenous regime switching to describe the short-run relationship. The empirical application on the S&P 500 Index and dividend shows that our model fits the data significantly better than existing models and provides estimates with meaningful interpretations. In addition, the linear cointegration is unsuitable to describe the long-run relationship, and the ECM with endogenous regime switching better explains the data than that with conventional Markov switching. An extract latent factor specifically reveals the periods for each regime, and the periods of high-volatility regime include the NBER recession periods and certain periods of financial crisis.
참고문헌 (41)
- Balke, N. S., "Low-Frequency Movements in Stock Prices : A State-Space Decomposition", Review of Economics and Statistics, 84(4), pp.649~667 (2002)
- Black, F., "Studies of Stock Price Volatility Changes", Proceedings of the 1976Meetings of the American Statistical Association, pp.177~181 (1976)
- Bohl, M. T., "The Present Value Model of U. S. Stock Prices Redux : A New Testing Strategy and Some Evidence", The Quarterly Review of Economics and Finance, 44(2), pp.208~223 (2004)
- Cai, Z., "Trending Time-Varying Coefficient Time Series Models with Serially Correlated Errors", Journal of Econometrics, 136(1), pp.163~188 (2007)
- Campbell, J. A., "Stock Price Behavior on Ex-Dividend Dates", The Journal of Finance, 10(4), pp.425~429 (1955)
- Campbell, J. Y., "Stock Returns and the Term Structure", Journal of Financial Economics, 18(2), pp.373~399 (1987)
- Campbell, J. Y., "Stock Prices, Earnings, and Expected Dividends", The Journal of Finance, 43(3), pp.661~676 (1988)
- Chang, Y., "A New Approach to Model Regime Switching", Journal of Econometrics, 196(1), pp.127~143 (2017)
- U. S. Monetary-Fiscal Regime Changes in the Presence of Endogenous Feedback in Policy Rules, "Chang, Y.", Indiana University, ~ (2018)
- Chen, S. -W., "Can the Nonlinear Present Value Model Explain the Movement of Stock Prices", International Research Journal of Finance and Economics, 23(23), pp.155~170 (2009)
- Carry Trades and Endogenous Regime Switches in Exchange Rate Volatility, "Cho, D.", Sungkyunkwan University, ~ (2018)
- Craine, R., "Rational Bubbles : A Test", Journal of Economic Dynamics and Control, 17(5), pp.829~846 (1993)
- Dasilas, A., "The Ex-Dividend Day Stock Price Anomaly : Evidence from the Greek Stock Market", Financial Markets and Portfolio Management, 23(1), pp.59~91 (2009)
- Engle, R. F., "Measuring and Testing the Impact of News on Volatility", The Journal of Finance, 48(5), pp.1749~1778 (1993)
- Esteve, V., "Are There Threshold Effects in the Stock Price-Dividend Relation? The Case of the U. S. Stock Market, 1871–2004", Applied Financial Economics, 18(19), pp.1533~1537 (2008)
- Esteve, V., "Threshold Cointegration and Nonlinear Adjustment Between Stock Prices and Dividends", Applied Economics Letters, 17(4), pp.405~410 (2010)
- Fama, E. F., "Disappearing Dividends: Changing firm Characteristics or Lower Propensity to Pay?", Journal of Financial Economics, 60(1), pp.3~43 (2001)
- Intrinsic Bubbles : The Case of Stock Prices, "Froot, K. A.", National Bureau of Economic Research, ~ (1989)
- Gallagher, L. A., "Risky Arbitrage, Limits of Arbitrage, and Nonlinear Adjustment in the Dividend-Price Ratio", Economic Inquiry, 39(4), pp.524~536 (2001)
- Harvey, A. C., "Estimation of an Asymmetric Stochastic Volatility Model for Asset Returns", Journal of Business & Economic Statistics, 14(4), pp.429~434 (1996)
- Hu, L., "Testing for Cointegration in Markov Switching Error Correction Models", Advances in Econometrics, 33, pp.123~150 (2014)
- Kanas, A., "Non-Linear Cointegration Between Stock Prices and Dividends", Applied Economics Letters, 10(7), pp.401~405 (2003)
- Kanas, A., "Nonlinearity in the Stock Price-Dividend Relation", Journal of International Money and Finance, 24(4), pp.583~606 (2005)
- Kim, C. -J., "Disappearing Dividends : Implications for the Dividend-Price Ratio and Return Predictability", Journal of Money, Credit and Banking, 45(5), pp.933~952 (2013)
- Kim, C. -J., "Estimation of Markov Regime-Switching Regression Models with Endogenous Switching", Journal of Econometrics, 143(2), pp.263~273 (2008)
- Lettau, M., "Reconciling the Return Predictability Evidence", Review of Financial Studies, 21(4), pp.1607~1652 (2008)
- Li, D., "Statistical Inference in Partially Time-Varying Coefficient Models", Journal of Statistical Planning and Inference, 141(2), pp.995~1013 (2011)
- McMillan, D. G., "Stock Return Predictability and Dividend-Price Ratio : A Nonlinear Approach", International Journal of Finance & Economics, 15(4), pp.351~365 (2010)
- Miller, M. H., "Dividend Policy, Growth, and the Valuation of Shares", The Journal of Business, 34(4), pp.411~433 (1961)
- Orbe, S., "Nonparametric Estimation of Time Varying Parameters under Shape Restrictions", Journal of Econometrics, 126(1), pp.53~77 (2005)
- Pagan, A. R., "Alternative Models for Conditional Stock Volatility", Journal of Econometrics, 45(1), pp.267~290 (1990)
- Park, J. Y., "Canonical Cointegrating Regressions", Econometrica, 60(1), pp.119~143 (1992)
- Park, J. Y., "Cointegrating Regressions with Time Varying Coefficients", Econometric Theory, 15(05), pp.664~703 (1999)
- Phillips, P. C., "Estimating Smooth Structural Change in Cointegration Models", Journal of Econometrics, 196(1), pp.180~195 (2017)
- Psaradakis, Z., "On Markov Error-Correction Models, with an Application to Stock Prices and Dividends", Journal of Applied Econometrics, 19(1), pp.69~88 (2004)
- Robinson, P. M., "Statistical Analysis and Forecasting of Economic Structural Change", pp.253~264 (1989), Springer
- Shiller, R. J., "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?", The American Economic Review, 71(3), pp.421~436 (1981)
- Shiller, R. J., "The use of Volatility Measures in Assessing Market Efficiency", The Journal of Finance, 36(2), pp.291~304 (1981)
- Wang, Q., "Asymptotic Theory for Local Time Density Estimation and Nonparametric Cointegrating Regression", Econometric Theory, 25(3), pp.710~738 (2009)
- Wang, Q., "Structural Nonparametric Cointegrating Regression", Econometrica, 77(6), pp.1901~1948 (2009)
- Zhang, T., "Inference of Time-Varying Regression Models", The Annals of Statistics, 40(3), pp.1376~1402 (2012)