Nonlinear Behavior of the US Stock Price-Dividend: Evidence from Threshold Unit Root Tests

This study investigates the behavior of US stock price–dividend relationships over the period 1871:01 to 2012:03 using a two-regime Threshold Autoregressive (TAR) model with an autoregressive unit root developed by Caner and Hansen (2001), which allows for simultaneously testing nonlinearity and non-stationary. Our findings indicate that the US stock price-dividend is a nonlinear series that is characterized by a unit root process in a particular month; the stock price-dividend ratio shows a decrease by more than 7.17% between the previous year and the previous fourth month.