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- Publisher
- Oxford University Press
- Copyright
- Copyright © 2021 Society for Financial Studies
- ISSN
- 2045-9920
- eISSN
- 2045-9939
- DOI
- 10.1093/rapstu/raab012
- Publisher site
- See Article on Publisher Site
Abstract
Abstract We contribute to identifying proxies for the information set of investors in financial markets. We show that the marketwide price-dividend ratio highly correlates with inflation and labor market variables that also forecast consumption, dividend, and GDP growth, but not with aggregate consumption or GDP growth. Our model with learning from inflation and wage earnings rationalizes the moments of consumption and dividend growth, market return, the price-dividend ratio, real and nominal term structures, the low predictive power of the price-dividend ratio for consumption and dividends, and the dynamics of the price-dividend ratio, unlike a nested model with learning from consumption alone. This content is only available as a PDF. © The Author 2021. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
Journal
The Review of Asset Pricing Studies – Oxford University Press
Published: May 17, 2021