On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing

75 Pages Posted: 25 May 2006 Last revised: 10 Aug 2010

See all articles by Jacob Boudoukh

Jacob Boudoukh

Interdisciplinary Center (IDC) Herzliyah; AQR Capital Management, LLC

Roni Michaely

The University of Hong Kong; ECGI

Matthew P. Richardson

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Michael R. Roberts

The Wharton School - University of Pennsylvania; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2004

Abstract

Previous research showed that the dividend price ratio process changed remarkably during the 1980's and 1990's, but that the total payout ratio (dividends plus repurchases over price) changed very little. We investigate implications of this difference for asset pricing models. In particular, the widely documented decline in the predictive power of dividends for excess stock returns in time series regressions in recent data is vastly overstated. Statistically and economically significant predictability is found at both short and long horizons when total payout yield is used instead of dividend yield. We also provide evidence that total payout yield has information in the cross-section for expected stock returns exceeding that of dividend yield and that the high minus low payout yield portfolio is a priced factor. The evidence throughout is shown to be robust to the method of measuring total payouts.

Suggested Citation

Boudoukh, Jacob and Michaely, Roni and Richardson, Matthew P. and Roberts, Michael R., On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing (July 2004). NBER Working Paper No. w10651, Available at SSRN: https://ssrn.com/abstract=579798

Jacob Boudoukh (Contact Author)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Roni Michaely

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

ECGI ( email )

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Matthew P. Richardson

New York University (NYU) - Department of Finance ( email )

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National Bureau of Economic Research (NBER)

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AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Michael R. Roberts

The Wharton School - University of Pennsylvania; National Bureau of Economic Research (NBER) ( email )

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Philadelphia, PA 19104-6365
United States
(215) 573-9780 (Phone)

HOME PAGE: http://finance.wharton.upenn.edu/~mrrobert/

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