City Research Online

Abstract

This paper suggests that dividends do not reflect permanent earnings of corporations in periods of high inflation and deflation, and therefore the price-dividend relationship, as predicted by Gordon’s dividend-price model, breaks down. Using data for the US and the UK over the period from 1871 to 2002, nonlinear estimates support the prediction of the model.

Publication Type:	Monograph (Discussion Paper)
Additional Information:	© 2003 the authors
Publisher Keywords:	Regime-switching, nonlinearity, price-dividend relationship, inflation and deflation
Subjects:	H Social Sciences > HB Economic Theory
Departments:	School of Policy & Global Affairs > Department of Economics > Discussion Paper Series

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