Realised equity returns: a theoretical and empirical study

Garry Hobbes

Research output: Book/ReportBook


The response of the stock market to news of earnings and dividend changes is important for investors. This monograph provides a theoretical model of realised equity returns which assumes linear forms for the dividend and earnings processes, and a discounted dividend model for price. Price is then derived as a nonlinear function of the dividends, earnings, dividend equation coefficients and earnings process coefficients. The model for realised return is tested using data for 90 U.S. firms listed on the New York Stock Exchange over a 44 year period. The results indicate changes in earnings and dividends (scaled by lagged price), the dividend policy parameters and the parameters of the earnings process are explanatory factors for equity returns. This returns model provides a theoretical foundation for investigations into realised equity returns. Thus, the analysis reveals avenues for further research into the theoretical determinants of equity returns and may be useful to academics with an interest in price determination.
Original languageEnglish
Place of PublicationSarbrücken, Germany
PublisherVDM Verlag Dr. Müller
Number of pages111
ISBN (Print)9783639300130
Publication statusPublished - 2010


  • Dividends--Econometric models
  • Earnings per share--Econometric models


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