Putting the dividend-price ratio under the microscope

We analyze the time-series properties of the dividend-price ratio (dpr) often used as one determinant of stock returns. Using, among others, the Saikkonen-LÄutkepohl unit root test that considers regime shift effects, evidence is obtained of a non-stationary dpr for Japan. Therefore, in contrast to studies of other industrialized countries, we find no significant one-to-one long-run relationship at all between Japanese stock prices and dividends