Scandinavian Working Papers in Business Administration
Finance Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies
No 03-1: A New Daily Dividend-adjusted Index for the Danish Stock Market, 1985-2002: Construction, Statistical Properties, and Return Predictability
Klaus Belter (), Tom Engsted () and Carsten Tanggaard ()
Additional contact information
Klaus Belter: Department of Finance, Aarhus School of Business, Postal: Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Tom Engsted: Department of Finance, Aarhus School of Business, Postal: Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Carsten Tanggaard: Department of Finance, Aarhus School of Business, Postal: Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Abstract: We present a new dividend-adjusted blue chip index for the Dan-
ish stock market covering the period 1985-2002. In contrast to
other indices on the Danish stock market, the index is calcu-
lated on a daily basis. In the first part of the paper a detailed
description of the construction of the index is given. In the sec-
ond part of the paper we analyze the time-series properties of
daily, weekly, and monthly returns, and we present evidence on
predictability of multi-period returns. We also compare stock re-
turns with the returns on long-term bonds and short-term money
market instruments (i.e. the equity risk premium), and we com-
pute the Hansen-Jagannathan bound to infer the properties of
the underlying stochastic discount factor generating Danish asset
returns.
Keywords: Asset market returns; mean-reversion and predictability; Hansen-Jagannathan bound
31 pages, May 9, 2003
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