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Working Paper
Bubbles or noise? Reconciling the results of broad-dividend variance-bounds tests
Recent research indicates that results of variance-bounds tests of stock price volatility may depend on the definition of cash flows deemed relevant to shareholders: Tests using regular (or "narrow") dividends repeatedly have suggested that stock prices fluctuate more than can be explained by a simple present value hypothesis, while some tests using "broad dividends" (i.e., narrow dividends plus proceeds from share liquidations) do not detect such excess price volatility. Researchers disagree as to the cause and meaning of these differences. This paper derives and analyzes the ...