An Empirical Examination of the Price-Dividend Relation with Dividend Management
Some recent empirical evidence suggests that stock prices are not properly modelled as the
present discounted value of expected dividends. In this paper we estimate a present value model of
stock price that is capable of explaining the observed long-term trends in stock prices. The model
recognizes that firm managers control cash dividend payments. The model estimates indicate that
stock price movements may be explained by managerial behavior.
