List of References
Basak, Suleyman, and Domenico Cuoco, 1997, “An Equilibrium Model with Restricted Stock Market Participation,” Rodney L. White Center for Financial Research Paper # 1–97 (Philadelphia: Wharton, University of Pennsylvania).
Frost, Robin, 1996, “A Look in the Mirror: The Changing Face of Stock Investors,” Wall Street Journal Interactive Edition, May 28.
Kramer, Charles, 1996, “Stock-Market Equilibrium and the Dividend Yield,” IMF Working Paper WP/96/90 (Washington: International Monetary Fund).
Laderman, Elizabeth, 1997, “Deposits and Demographics?”, Federal Reserve Bank of San Francisco Economic Letter, Number 97–19, June 27, 1997.
Prepared by Charles Kramer.
Remarks by Federal Reserve Board Chairman Alan Greenspan at the American Enterprise Institute, December 5, 1996.
For a complete explanation of the theoretical model used in this analysis and its empirical specification and estimation, see Kramer (1996).
These variables are often used in empirical studies of asset pricing, and they forecast dividend growth rates and stock returns out of sample.
The data on mutual-fund inflows are not available before 1984.
The coefficient and standard error for MUFI are multiplied by 104 for ease of presentation.
The forecasts presented here are dynamic forecasts, while those in Kramer (1996) are onestep-ahead static forecasts.
The difference between the forecasts from the basic and augmented models is not accounted for by differences in the coefficients on the common variables in the two models. If the mutual fond inflow variable is held constant at its December 1994 value over the forecast horizon, the forecast from the augmented model is similar to the one from the basic model.
The contribution of each variable is calculated as the effect on the forecast of the change in the dividend yield that results from allowing the variable to vary over the forecast period, expressed as a percent of the actual change in the dividend yield. The contributions do not add to 100 percent because of the lags in the independent variables and because part of the change in the forecast is explained by historical residuals.