We develop and estimate a model of the dynamic behavior of aggregate corporate dividends as a function of the change in permanent earnings of firms.Although structured along the lines of the Lintner-Brittain-FamaBabiak models of individual-firm dividend behavior, the model uses changes in stock prices instead of accounting earnings to measure permanent earnings changes. The performance of the model is compared with both the accounting earnings-based models and the trend-autoregressive model associated with Shiller (1981a).-3-I.

Thl8 paper Is concerned with the size-related anomalies in stock returns reported by Banz (1981) and Reinganum (1981

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