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Excess volatility? the Australian stock market from 1883 to 1999

Excess volatility? the Australian stock market from 1883 to 1999 Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the Shiller (1981) test as well as applying standard time series analysis to annual Australian stock market data for the period 1883 to 1999. While Shiller’s test suggests the possibility of excess volatility, time series analysis identifies a long‐run relationship between share market value and dividends, consistent with the share market reverting to its fundamental discounted cash flow value over time. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

Excess volatility? the Australian stock market from 1883 to 1999

Managerial Finance , Volume 29 (10): 19 – Nov 1, 2003

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Publisher
Emerald Publishing
Copyright
Copyright © 2003 MCB UP Ltd. All rights reserved.
ISSN
0307-4358
DOI
10.1108/03074350310768526
Publisher site
See Article on Publisher Site

Abstract

Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the Shiller (1981) test as well as applying standard time series analysis to annual Australian stock market data for the period 1883 to 1999. While Shiller’s test suggests the possibility of excess volatility, time series analysis identifies a long‐run relationship between share market value and dividends, consistent with the share market reverting to its fundamental discounted cash flow value over time.

Journal

Managerial FinanceEmerald Publishing

Published: Nov 1, 2003

Keywords: Accounting research; Share prices; Volatility; Theory; Australia

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