Fluctuations in the UK equity market: what drives stock returns?

Rambaccussing, Dooruj; Power, David

doi:10.1080/1351847x.2017.1335649

Cited by 2 publications

(2 citation statements)

References 23 publications

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“…However, different results have emerged from these investigations using non-U.S. data. Rambaccussing and Power (2017) provide evidence that predictability may differ across different frequencies in the United Kingdom. Henkel, Martin, and Nardari (2011) show that return predictability is higher during economic contractions for G7 economies, which they associate with counter-cyclical risk premiums.…”

Section: Introductionmentioning

confidence: 88%

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Expected returns and expected dividend growth in Europe: Legal origin, institutional, and financial determinants

Rambaccussing

Power

2018

Int. J Fin Econ

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This paper uses a present value approach to show that price movements for equity indices in a sample of European stock markets can be traced to legal origin, institutional, and corporate financial factors. The present value literature states that stock indices move due to changes either in discount rates, dividend growth, or a combination of the two. Empirically, little is known about the mechanism through which legal, institutional, and corporate financial factors influence these variables, especially in a European context. The current paper attempts to plug this gap in the literature. Using the state space approach, we show that although expected returns are highly persistent, expected dividend growth tends to vary across the sample. Movements in markets are mainly due to changes in the discount rate. However, there appears to be a difference in the proportion of movements attributable to discount rate and dividend growth components. Stock markets in civil law countries tend to have a stronger link with the dividend growth variables as well as market size and activity measures. Expected dividend growth is also driven by profitability factors in both types of country. By contrast, there is no strong evidence of corporate indicators influencing expected returns.

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Section: Introductionmentioning

confidence: 88%

“…Dividend growth predictability also tends to differ depending on how the portfolios of equities are constructed. Rambaccussing and Power (2017) provide evidence that predictability may differ across different frequencies in the United Kingdom.…”

Section: Introductionmentioning

confidence: 88%

Expected returns and expected dividend growth in Europe: Legal origin, institutional, and financial determinants

Rambaccussing

Power

2018

Int. J Fin Econ

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The price–rent ratio inequality in Scottish Cities: fluctuations in discount rates and expected rent growth

Rambaccussing

2021

SN Bus Econ

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The price to rent ratio can be used to identify properties which are either overvalued or undervalued according to market fundamentals. Fluctuations in the price to rent ratio over time, can be traced to either changes in expectations of future house price growth (expected returns) or rental growth. In this paper, we measure the impact of these latent variables in Scotland’s main cities by implementing a state-space model based on the present value. The model estimates show that the proportion of expected rent growth and expected returns driving the price to rent ratio differs across Scotland. Glasgow seems to be driven mostly by expected returns, while rent growth drives price movements in Edinburgh. A geographic dimension is noted as cities on the East coast share similar expected returns and expected rent growth. Housing market trends in Scotland mostly follow the Edinburgh experience. Further decompositions show that house price changes are driven by an equal combination of expected rent growth and expected returns in Dundee and Aberdeen.

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Fluctuations in the UK equity market: what drives stock returns?

Cited by 2 publications

References 23 publications

Expected returns and expected dividend growth in Europe: Legal origin, institutional, and financial determinants

Expected returns and expected dividend growth in Europe: Legal origin, institutional, and financial determinants

The price–rent ratio inequality in Scottish Cities: fluctuations in discount rates and expected rent growth

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