Stock Prices Still Move Too Much For Dividends But Less So: A Reappraisal of Shiller 1981 

In this paper, we revisit and extend the analysis in Shiller (1981) to an updated sample. The main puzzling result of the paper is that the fundamental present value model of stock prices predicts a volatility at odds with the data: the stock prices are much more volatile compared to what discounted future dividends would imply. Our paper closely replicates the results for the S&P 500 index. For an updated sample between 1963 and 2018, we find that the excess volatility puzzle is still strong, but it has diminished by a third relative to the sample period in Shiller (1981).