Question 817 expected and historical returns, income and capital returns
Over the last year, a constant-dividend-paying stock's price fell, while it's future expected dividends and profit remained the same. Assume that:
- Now is t=0, last year is t=−1 and next year is t=1;
- The dividend is paid at the end of each year, the last dividend was just paid today (C0) and the next dividend will be paid next year (C1);
- Markets are efficient and the dividend discount model is suitable for valuing the stock.
Which of the following statements is NOT correct? The stock's: