How non-linear are (log) price-dividend ratios in the fundamental state variables? The accuracy log-linear approximations lies at the heart of much contemporary asset pricing. We analytic- ally solve a parsimonious partial-equilibrium valuation model and uncover preliminary evidence suggesting that some caution be in order only if the fundamentals are extremely persistent.
Sbuelz, A., Mignanego, F., Analytical cyclical price-dividend ratios (2012 version), <<Contributi di ricerca in Econometria e Matematica>>, 2012; (2): 1-37 [http://hdl.handle.net/10807/31514]
Analytical cyclical price-dividend ratios (2012 version)
Sbuelz, Alessandro;Mignanego, Fausto
2012
Abstract
How non-linear are (log) price-dividend ratios in the fundamental state variables? The accuracy log-linear approximations lies at the heart of much contemporary asset pricing. We analytic- ally solve a parsimonious partial-equilibrium valuation model and uncover preliminary evidence suggesting that some caution be in order only if the fundamentals are extremely persistent.
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