Cross-Sectional Volatility of Dividend Yields on the UK Stock Market

This paper computes perfect foresight stock prices for 248 stocks on the UK stock market 1955-74. By comparing actual and perfect foresight dividend yields we find that Kleidon's (1986) cross sectional variance bound of efficient markets is satisfied. However we note that a variance bounds test is only a weak test of market efficiency, and when we apply the more powerful cross section regression based tests we are able to reject the hypothesis of efficient markets. 

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