Dividend persistence and dividend behaviour

Kam Fong Chan, John G. Powell, Jing Shi, Tom Smith

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This article demonstrates how a spurious regression problem caused by
dividend persistence is compounded by a spurious correlation problem when
the dependent and independent variables in dividend behaviour regressions are
ratios composed of common component variables. This article utilises a
simulation procedure to take account of these problems, with the findings
implying that extreme care should be taken when using ratios as predictor or
explanatory variables in time series regression. This article introduces a
reformulated Lintner first difference dividend behaviour model that is not
subject to spurious regression in which past prices predict subsequent changes
in dividends.
LanguageEnglish
Pages127-147
Number of pages21
JournalAccounting and Finance
Volume58
Issue number1
DOIs
Publication statusPublished - Mar 2018
Externally publishedYes

Fingerprint

Dividends
Persistence
Spurious regression
Predictors
Common component
Spurious correlation

Keywords

  • dividend behaviour
  • dividend persistence
  • spurious regression and correlation

Cite this

Chan, Kam Fong ; Powell, John G. ; Shi, Jing ; Smith, Tom. / Dividend persistence and dividend behaviour. In: Accounting and Finance. 2018 ; Vol. 58, No. 1. pp. 127-147.
@article{5c873055697d44ac8dd391f5011e9c05,
title = "Dividend persistence and dividend behaviour",
abstract = "This article demonstrates how a spurious regression problem caused bydividend persistence is compounded by a spurious correlation problem whenthe dependent and independent variables in dividend behaviour regressions areratios composed of common component variables. This article utilises asimulation procedure to take account of these problems, with the findingsimplying that extreme care should be taken when using ratios as predictor orexplanatory variables in time series regression. This article introduces areformulated Lintner first difference dividend behaviour model that is notsubject to spurious regression in which past prices predict subsequent changesin dividends.",
keywords = "dividend behaviour, dividend persistence, spurious regression and correlation",
author = "Chan, {Kam Fong} and Powell, {John G.} and Jing Shi and Tom Smith",
year = "2018",
month = "3",
doi = "10.1111/acfi.12208",
language = "English",
volume = "58",
pages = "127--147",
journal = "Accounting and Finance",
issn = "0810-5391",
publisher = "John Wiley & Sons",
number = "1",

}

Dividend persistence and dividend behaviour. / Chan, Kam Fong; Powell, John G.; Shi, Jing; Smith, Tom.

In: Accounting and Finance, Vol. 58, No. 1, 03.2018, p. 127-147.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Dividend persistence and dividend behaviour

AU - Chan,Kam Fong

AU - Powell,John G.

AU - Shi,Jing

AU - Smith,Tom

PY - 2018/3

Y1 - 2018/3

N2 - This article demonstrates how a spurious regression problem caused bydividend persistence is compounded by a spurious correlation problem whenthe dependent and independent variables in dividend behaviour regressions areratios composed of common component variables. This article utilises asimulation procedure to take account of these problems, with the findingsimplying that extreme care should be taken when using ratios as predictor orexplanatory variables in time series regression. This article introduces areformulated Lintner first difference dividend behaviour model that is notsubject to spurious regression in which past prices predict subsequent changesin dividends.

AB - This article demonstrates how a spurious regression problem caused bydividend persistence is compounded by a spurious correlation problem whenthe dependent and independent variables in dividend behaviour regressions areratios composed of common component variables. This article utilises asimulation procedure to take account of these problems, with the findingsimplying that extreme care should be taken when using ratios as predictor orexplanatory variables in time series regression. This article introduces areformulated Lintner first difference dividend behaviour model that is notsubject to spurious regression in which past prices predict subsequent changesin dividends.

KW - dividend behaviour

KW - dividend persistence

KW - spurious regression and correlation

UR - http://www.scopus.com/inward/record.url?scp=84960342897&partnerID=8YFLogxK

U2 - 10.1111/acfi.12208

DO - 10.1111/acfi.12208

M3 - Article

VL - 58

SP - 127

EP - 147

JO - Accounting and Finance

T2 - Accounting and Finance

JF - Accounting and Finance

SN - 0810-5391

IS - 1

ER -