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The following question is based on Campbell, John Y. and Robert J. Shiller, Valuation Ratios and the Long-Run Stock Market Outlook: An Update NBER Working
The following question is based on Campbell, John Y. and Robert J. Shiller, Valuation Ratios and the Long-Run Stock Market Outlook: An Update NBER Working Paper No. 8221, April 2001. It is well-known that dividend-price ratio, DP is mean-reverting.
10. If the stock price follows a random-walk process, how does a high dividend-price ratio, DP predict future stock price growth and future dividend growth?
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