Quant Radio: Can Dividend-Price Ratio Predict Stock Return?

In this video, we explore a fundamental question in finance: Are stock returns predictable? We focus on one classic metric — the Dividend-Price (DP) Ratio — and dive into a major research study that puts its predictive power to the test.

What You'll Learn:

- What the DP ratio is and why it might predict market returns

- How researchers tested this idea using nearly 90 years of S&P 500 data (1927–2017)

- The difference between in-sample and out-of-sample testing

- What statistical significance and RMSE (Root Mean Square Error) mean for forecasting accuracy

- The study’s findings, including a meaningful 7.8% R² in-sample and a 3.42% RMSE out-of-sample

- Important limitations: short-term focus, single-variable model, and implications for long-term investors

Whether you're a finance student, investor, or just curious about how market prediction works, this video offers an insightful look into academic research and the methods behind it.

Join us as we unpack the data, the theory, and the limitations — and ask what it really tells us about market predictability.

Find the full research paper here: https://community.quantopian.com/c/community-forums/can-dividend-price-ratio-predict-stock-return

For more quant-focused content, join us at ⁠⁠⁠⁠https://community.quantopian.com⁠⁠⁠⁠. There, you can explore a wealth of resources, connect with fellow quants, engage in insightful discussions, and enhance your skills through our extensive range of online courses.

Quant Radio is an AI-generated podcast, intended to help people develop their knowledge and skills in Quant finance. This podcast is not intended to provide investment advice.