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Dividends paid by corporations from their profits to their shareholders

Dividends, paid by corporations from their profits to their shareholders, have fluctuated over time as a percentage of profits and this percentage has risen to some extent over the years. Table 14.4.11 shows the computer results of a Box–Jenkins analysis of dividends as a percentage of corporate profits, annually from 1990 to 2008, while Figure 14.4.2 shows the data series with the Box–Jenkins forecasts.21

a. What kind of component (autoregressive or moving average) does the estimated model include?

b. How many differences are used in the model?

c. Is the model component that you identified in part a significant?

d. Is the constant term significant?

e. Based on the figure, would you be surprised if dividends dropped to 30% of profits in 2015?

f. Based on the figure, would you be surprised if dividends rose to 65% of profits in 2015?

FIGURE 14.4.2

a. What kind of component (autoregressive or moving average) does the estimated model include?

b. How many differences are used in the model?

c. Is the model component that you identified in part a significant?

d. Is the constant term significant?

e. Based on the figure, would you be surprised if dividends dropped to 30% of profits in 2015?

f. Based on the figure, would you be surprised if dividends rose to 65% of profits in 2015?

FIGURE 14.4.2

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