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Dividend Yields and Stock Returns: Evidence of Time Variation between Bull and Bear Markets
Author(s) -
Gombola Michael J.,
Liu FengYing L.
Publication year - 1993
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1993.tb01350.x
Subject(s) - dividend yield , stock (firearms) , dividend , economics , financial economics , monetary economics , yield (engineering) , rate of return , econometrics , dividend policy , finance , geography , materials science , archaeology , metallurgy
This study documents persistent shifts in the relationship between stock returns and dividend yields over bull and bear markets. The shift in this relationship appears as a separate effect, distinct from the January effect, and after controlling for firm size and systematic risk. After controlling for these other factors, dividend yield is positively related to return during bear markets but negatively related to return during bull markets. This time‐varying relationship between dividend yield and stock return helps to explain the anomalous results of earlier studies.