caa a22 4500 397544758 CHVBK 20180308164736.0 cr unu---uuuuu 161202e199610 xx s 000 0 eng 10.2307/2297792 doi (NATIONALLICENCE)oxford-10.2307/2297792 Timmermann Allan University of California, San Diego Excess Volatility and Predictability of Stock Prices in Autoregressive Dividend Models with Learning [Elektronische Daten] [Allan Timmermann] To what extent can agents' learning and incomplete information about the "true” underlying model generating stock returns explain findings of excess volatility and predictability of returns in the stock market? In this paper we analyse two models of recursive learning in the stock market when dividends follow a (trend-)stationary autoregressive process. The asymptotic convergence properties of the models are characterized and we decompose the variation in stock prices into rational expectations and recursive learning components with different rates of convergence. A present-value learning rule is found to generate substantial excess volatility in stock prices even in very large samples, and also seems capable of explaining the positive correlation between stock returns and the lagged dividend yield. Self-referential learning, where agents' learning affect the law of motion of the process they are estimating, is shown to generate some additional volatility in stock prices, though of a magnitude much smaller than present value learning © 1996 The Review of Economic Studies Limited The Review of Economic Studies Wiley-Blackwell 63/4(1996-10), 523-557 0034-6527 63:4<523 1996 63 restud https://doi.org/10.2307/2297792 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.2307/2297792 text/html Onlinezugriff via DOI NATIONALLICENCE 100 1- Timmermann Allan University of California, San Diego NATIONALLICENCE 773 0- The Review of Economic Studies Wiley-Blackwell 63/4(1996-10), 523-557 0034-6527 63:4<523 1996 63 restud Metadata rights reserved CC BY-NC-4.0 http://creativecommons.org/licenses/by-nc/4.0 nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-oxford