Download industry-level data for the dividend yield or dividend payout ratio for theUnited States, Europe, Japan, or Emerging Markets from the current data page onAswath Damodarans website. Also download industry-level data for the debt-to-capital ratio, market beta, and expected growth in earnings per share (EPS) over thenext five years for the same country or country group.
Estimate a linear regression with the dividend yield or dividend payout ratio (debt-to-capital ratio) serving as the dependent (explanatory) variable. In addition, estimatequadratic and cubic regression specifications. Do you find evidence of nonlinearities inthe relationship between the dividend yield or dividend payout ratio and the debt-to-capital ratio? Create a scatterplot for the dependent and explanatory variables thatincludes the fitted linear, quadratic, and cubic regressions.
Estimate a multiple linear regression with the dividend yield or dividend payout ratioserving as the dependent variable and the debt-to-capital ratio, market beta, andexpected earnings growth serving as the explanatory variables. Report the results(coefficient estimates, standard errors, t-statistics, R2 statistic) in a table. Discuss theresults.
Provide the Stata code in an appendix.
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