Business Commons^™

An Empirical Examination Of The Price-Dividend Relation With Dividend Management, Lucy F. Ackert, William C. Hunter

Faculty and Research Publications

Some recent empirical evidence suggests that stock prices are not properly modeled as the present discounted value of expected dividends. In this paper, we estimate a present value model of stock price that is capable of explaining the observed long-term trends in stock prices. The model recognizes that firm managers control cash dividend payments. The model estimates indicate that stock price movements may be explained by managerial behavior.