van Binsbergen, JulesKoijen, Ralph2023-05-222023-05-222010-01-012016-06-10https://repository.upenn.edu/handle/20.500.14332/34390We propose a latent variables approach within a present-value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the history of price-dividend ratios and dividend growth rates to predict future returns and dividend growth rates. We find that returns and dividend growth rates are predictable with  values ranging from 8.2% to 8.9% for returns and 13.9% to 31.6% for dividend growth rates. Both expected returns and expected dividend growth rates have a persistent component, but expected returns are more persistent than expected dividend growth rates.This is the peer reviewed version of the following article, which has been published in final form at http://dx.doi.org/10.1111/j.1540-6261.2010.01575.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.FinanceFinance and Financial ManagementArticle