Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 3 (2015), No. 3, Pages 38-45

DOI: 10.12735/jfe.v3i3p38

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Has the Stock Market Become More Efficient in the Long-Run? Evidence from U.S Corporations

Kai Chen1  Jie Feng1  Richard D. Marcus2 

1School of Economics & Business, SUNY Oneonta, Oneonta, NY 13820, USA
2Lubar School of Business, University of Wisconsin-Milwaukee, USA

URL: https://doi.org/10.12735/jfe.v3i3p38

To Cite this Article     Article Views: 924     Downloads: 432  Since deposited on 2015-08-22

Abstract

Using the cointegration model to deal with nonstationary time series, we estimate the long-run relationship between the average stock price and the average dividend. The results from U.S. time series data of 141 years show that the discount rate is lower in the second half of this period, which indicates that stock market becomes more efficient and capital cost becomes lower in the long run. Along with well-documented narrowing of the bid-ask spreads of stocks over time and the growing speed of stock market order fulfillment, market efficiency is further exemplified by lower dividend yields.

JEL Classifications: G10, C58

Keywords: cointegration, discount rate, market efficiency

To Cite this Article: Chen, K., Feng, J., & Marcus, R. D. (2015). Has the stock market become more efficient in the long-run? Evidence from U.S corporations. Journal of Finance and Economics, 3(3), 38-45. https://doi.org/10.12735/jfe.v3i3p38

Copyright © Kai Chen et al.

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Has the Stock Market Become More Efficient in the Long-Run? Evidence from U.S Corporations
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