Dividend predictability around the world Jesper Rangvid Maik Schmeling Andreas Schrimpf This version: June 28, 2011 大侠素材铺 淘宝店：https://dxpu.taobao.com/ Reported by XuNuo（许诺） Student No. 17720971

01 Introduction aggregate dividend growth is highly predictable by dividend yields in medium-sized and smaller countries, but generally not in larger countries. Large literature examines whether dividend growth rates in the U.S. are predictable by the dividend yield. This paper provides fresh perspectives to this literature by extending it to a global setting. & dividend predictability is weaker in countries where the typical firm is larger and idiosyncratic dividend growth and return volatilities are lower . in countries where the quality of institutions is high, dividend predictability is weak. the apparent lack of dividend predictability in the U.S. does not, in general, extend to other countries. Rather, dividend predictability is driven by cross-country dierences in firm characteristics, dividend smoothing, and institutions.

Data 02 This paper analyzes a total of 50 countries for which dividend yields, price and total return data are available and employ a quarterly frequency. This paper uses the share price indices and total return indices from M.S.C.I. and dividends and dividend yields from Datastream, as the available M.S.C.I data span a much shorter subperiod.

03 Documenting dividend predictability in small and large countries 3.1 First illustrative results: Predictive regressions for selected individual countries The first thing they do is to provide some initial results from a few simple country-by-country regressions, i.e. a setting where there is no conversion of returns to USD. The intention with these first regressions is to illustrate the main finding of the paper that dividend sare generally more predictable in smaller countries using the standard regressions often performed in the literature. To this end, they split the total of 50 countries into three size groups based on their market capitalization in 2009 (at the 33:3% breakpoints) and show results for return anddivid end predictability for three more or less arbitrary countries from each of these groups.

03 Documenting dividend predictability in small and large countries 3.2 Comprehensive results: Time-series regressions They turn to the study of dividend and return predictability in all countries, using their equal- and value-weighted portfolios. they first test the implications in the time-series dimension, i.e. evaluate whether variation over time in the dividend yield of aportfolio forecasts high returns on the portfolio, low dividend growth, and/or appreciationsof the USD. They run three time-series regressions: future values of dividend growth rates measured in foreign currency on current-period dividend yields, future values of stock returns in USD on current-period dividend yields, and future values of exchange rate changes on current-period dividend yields:

03 Documenting dividend predictability in small and large countries 3.3 Portfolio sorts They sort countries into portfolios and investigate cross-sectional patterns in returns, dividend growth, and exchange rate changes. In addition to illustrating the economic importance of predictability,the portfolio approach also has some advantages compared to the predictive regressions employed in Section 4.2. First, we can directly focus on patterns in returns, dividend growth,and exchange rates that occur through predictability by the dividend yield, since portfolio sorts isolate these effects and average out other factors (see e.g. Cochrane, 2007; Lustig andVerdelhan, 2007). Second, we can investigate return and cash flow predictability without having to rely on predictive regressions and their associated econometric problems due to persistent regressors and overlapping data.

04 Dividend predictability and dividend smoothing In this section, They show that dividends are also less smooth in smaller countries. This is important because dividend smoothing makes dividends more dicult to predict by the dividend yield as dividend fluctuations (that will be small when dividends are smooth) then get disconnected from dividend yield fluctuations. Hence, if dividends are smooth in countries with large equity markets, dividends will also be dicult to predict in these markets. To show this, they proceed in two steps. they first show that dividends are indeed smoother in countries with large equity markets. Afterwards, they relate smoothing and predictability directly.

05 Dividend predictability and firm characteristics They investigate two hypotheses in this section: (1)Whether dividends are more predictable in smaller countries because the typical firm in these countries is smaller (2)Whether dividends are more predictable in smaller countries because the volatility of rms' dividends or returns is higher in smaller countries. In addition, they also provide some evidence on the cross-section of U.S. firms by showing that the dividends of larger U.S. firms are more dicult to predict than those of smaller U.S. firms.they end up discussing the implications of these findings for theories of dividend smoothing.

Robustness 06 (1) First of all, they evaluate whether our main results can also be found for a selected predictable in smaller countries, such as Argentina, Austria, and New Zealand.they also took special care in evaluating the robustness of our results with respect to specific kinds of countries. (2)Second, we evaluate whether our results are robust towards the use of excess returns instead of simple returns and real dividend growth expressed in USD instead of nominal dividend growth in foreign currency units. (3) Third, we check whether our results are driven by recently added small emerging markets (4) Fourth, we construct portfolios by using standardized dividend yields instead of the level of dividend yields themselves. \

Conclusion 07 The results in this paper point towards interesting directions for future research. First, there is a large cross-sectional return spread in portfolios sorted on lagged dividend yields which calls for an explanation. For this, one needs an asset-pricing model that ties thereturns on the different portfolios to differences in their exposures to observable systematic risk factors. It would also be interesting to have a more well-developed theory for why larger firms smooth dividends more, as we find in international data and Leary and Michaely (2010) find in U.S. data. Especially, it would be interesting to investigate whether their findings of higher dividend volatility in smaller and sometimes emerging countries are related to the findings in the literature on the Great Moderation that volatility of consumption falls when economics develop and economic policies improve.

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