Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/24060 
Year of Publication: 
2004
Series/Report no.: 
ZEW Discussion Papers No. 04-51
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
Recent research suggests that the power law is one of the most universal laws in nature and it also seems to work quite fine in economics and finance. In this paper we show that the power law explains extremely well the relationship between the value of broad-based market indices and their dividends. We also show that this relationship is consistent with declining relative risk aversion of the representative investor. Hence, the power law has a solid economic foundation.
Subjects: 
Power law
stock prices
dividends
co-integration
JEL: 
E44
G15
G12
Document Type: 
Working Paper

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