Shiller, RobertJ. 1981."Do Stock Prices Move Too Much to Be Justified by
Subsequent Changes in Dividends?"American Economic Review,71(3): 421-36.
Standardmodelsofassetmarketequilibriumimplythatthevalueofa shareof
corporate stockequalsthepresentdiscountedvalueofthatstock'sexpectedfuture
payouts.Thispaperappliedan ingenioustestofthispresentvaluerelationship,
whichcomparedthevarianceofannualstockpricemovements withthevariance
incorporate dividendpayouts, totheUS equitymarket fortheperiod1870-1979.
Theresultssuggestedthathistorical stockpricevolatilitywasmuchgreaterthan
thevolatilityofdividendpayoutswouldappeartowarrant. Thisempiricalfinding
stimulated a wide
rangeoffollow-onresearchexploringvariousaspectsoftheefficientmarkets hypothesis, testingfortime- varyingdiscountratesincapitalmarkets,
andinvestigating theeconometric properties ofstockmarket returns andcorporate
payouts.