## Stock-Market Equilibrium and the Dividend Yield

_IMF Working Papers, August 1, 1996_

## Source details

**Canonical URL:** [Stock-Market Equilibrium and the Dividend Yield](https://www.imf.org/en/publications/wp/issues/2016/12/30/stock-market-equilibrium-and-the-dividend-yield-1921)

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## Bibliographic details
- Authors: Charles Frederick Kramer
- Published: August 1, 1996
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451951981.001

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### Research question and scope
- Can fundamentals account for the recent performance of the U.S. stock market?
- Focuses on deviations of the price/earnings ratio from historical averages and a historic low in the dividend/price ratio.
- Assesses the recent rise in the stock market using a model for the equilibrium dividend/price ratio.

### Main findings
- Economic variables can account for most of the recent fall in the dividend/price ratio.
- Mutual-fund inflows have some marginal explanatory power for the recent rise in stock prices.
- Implication: while fundamentals explain a large share of movements in the dividend/price ratio, flows into mutual funds contributed additionally, though marginally.

### Model components and key concepts examined
- Equilibrium dividend/price ratio (central model variable).
- Consideration of:
  - dividend growth
  - inflation rate
  - default premium
  - log dividend yield
  - mutual-fund inflow
  - price ratio
  - steepening yield curve
  - Treasury bills and bonds (implied through yield curve and related terms)

### Subjects and keywords
- Subject: Asset prices, Financial institutions, Financial markets, Financial services, Prices, Stock markets, Stocks, Treasury bills and bonds, Yield curve
- Keywords: Asset prices, default premium, dividend growth, inflation rate, log dividend yield, mutual-fund inflow, price ratio, steepening yield curve, Stock markets, Stocks, Treasury bills and bonds, WP, Yield curve

*IMF Working Papers — "Stock-Market Equilibrium and the Dividend Yield" by Charles Frederick Kramer, Working Paper No. 1996/090.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/stock-market-equilibrium-and-the-dividend-yield-1921_