A New Daily Dividend-adjusted Index for the Danish Stock Market, 1985-2002: Construction, Statistical Properties, and Return Predictability

We present a new dividend-adjusted blue chip index for the Dan- <p> ish stock market covering the period 1985-2002. In contrast to <p> other indices on the Danish stock market, the index is calcu- <p> lated on a daily basis. In the first part of the paper a detailed <p> description of the construction of the index is given. In the sec- <p> ond part of the paper we analyze the time-series properties of <p> daily, weekly, and monthly returns, and we present evidence on <p> predictability of multi-period returns. We also compare stock re- <p> turns with the returns on long-term bonds and short-term money <p> market instruments (i.e. the equity risk premium), and we com- <p> pute the Hansen-Jagannathan bound to infer the properties of <p> the underlying stochastic discount factor generating Danish asset <p> returns.