Critical Finance Review > Vol 10 > Issue 3

The Dog and the Straw Man: Response to “Dividend Growth Does Not Help Predict Returns Compared to Likelihood-Based Tests: An Anatomy of the Dog”

John H. Cochrane, Hoover Institution, Stanford University and NBER, USA, john.cochrane@stanford.edu
 
Suggested Citation
John H. Cochrane (2021), "The Dog and the Straw Man: Response to “Dividend Growth Does Not Help Predict Returns Compared to Likelihood-Based Tests: An Anatomy of the Dog”", Critical Finance Review: Vol. 10: No. 3, pp 465-470. http://dx.doi.org/10.1561/104.00000106

Publication Date: 02 Aug 2021
© 2021 John H. Cochrane
 
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Keywords
C22G1
Predictive regressionsPresent-value relationshipStock-return predictability
 

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The Dog and the Straw Man: Response to “Dividend Growth Does Not Help Predict Returns Compared to Likelihood-Based Tests: An Anatomy of the Dog” 
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Abstract

I respond to Hjalmarsson and Kiss (2021). Cochrane (2008) does not advocate a “data-dependent null,” a testing methodology in which one always uses a sample value as null hypothesis for a test statistic. In fact, I calculate sampling distributions for a wide variety of fixed null values of the parameters. How best to impose prior information that the dividend yield is stationary remains an important question highlighted by both papers.

DOI:10.1561/104.00000106