McMillan D (2006) The price-dividend ratio and limits to arbitrage: Evidence from a time-varying ESTR model. Economics Letters, 91 (3), pp. 408-412. https://doi.org/10.1016/j.econlet.2005.12.024
Recent share price dynamics has led to much debate within academic and practitioner circles. Researchers have typically argued that either a bubble component exists within prices, or that the price–dividend relationship exhibits persistence. This note shows that an empirical model designed to capture limits to arbitrage can explain the movement in prices over the recent past.
Present value model; ESTR model; limits to arbitrage
Economics Letters: Volume 91, Issue 3
|Publication date online||27/04/2006|
|Date accepted by journal||22/12/2005|