Dividend yields, business conditions, and expected security returns : a South African perspective
The analysis of this topic has continued to draw attention from academics such as Jensen Johnson and Mercer (1996), Patelis (1997) and Booth and Booth (2001) who examine the results of Fama et al. (1988) under differing monetary policy regimes. Jensen et al. (1996) posit that monetary stringency affects investors' required rate of return, which is consistent with Fama et al.'s (1989) arguments that predictable variation in returns reflects rational variation in required returns. Patelis (1997) finds that monetary variables used in his analysis are marginally significant predictors of security returns across different time horizons, while Booth et al. (2001) find that measures of the stance of monetary policy contain significant explanatory information that may be used to forecast expected stock and bond returns.
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