Topic: Dividend Dynamics, Learning, and Expected Stock Index Returns

Speaker: Ravi Jagannathan, John F. Sandner Professor of Finance, Kellogg School of Management, Northwestern University

Date: October 17 (Wednesday)

Time: 10:00-11:30am

Location: Building 4 Room 101

Language: English

Abstract:

We present a latent variable model of dividends that predicts, out-of-sample, 39.5% to 41.3% of the variation in annual dividend growth rates between 1975 and 2016. Further, when learning about dividend dynamics is incorporated into a long-run risks model, the model predicts, out-of-sample, 25.3% to 27.1% of the variation in annual stock index returns over the same time horizon, with learning contributing approximately half of the predictability in returns. These findings support the view that investors' aversion to long-run risks and their learning about these risks are important in determining stock index prices and expected returns.

About the speaker:

Dr. Ravi Jagannathan is the Chicago Mercantile Exchange/John F. Sandner Professor of Finance at Northwestern University's Kellogg School of Management and Co-Director of the Financial Institutions and Markets Research Center at the Kellogg School (1997 - present). He has previously held positions as Piper Jaffray Professor of Finance (1993 - 1997) and Associate Professor of Finance (1989 - 1993) at the University of Minnesota's Carlson School of Management, Assistant Professor of finance at Northwestern University's Kellogg School (1983 - 1989), and as a Distinguished Visiting Professor at the Hong Kong University of Science and Technology (1994 - 1995), and has appointments as Special Terms professor at Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University (2012+) and the Indian School of Business (2012-2014) and the Area Leader for Finance, Economics, and Public Policy at the Indian School of Business (2014 - 2018).

Ravi received a Ph.D. in Financial Economics (1983) and an M.S. in Financial Economics (1981) from Carnegie Mellon University, an M.B.A. from the Indian Institute of Management at Ahmedabad (1972), and a B.E. in Mechanical Engineering from the University of Madras (1970). His Ph.D dissertation received the Alexander Henderson award for excellence in economics.