A study of dividend yield model under stochastic earning yield environment in stock exchange of Thailand

Abstract

Abstract A compound Ornstein–Uhlenbeck process is applied to create a model that can calculate the dividend yield represented in a sample case of Stock Exchange of Thailand index in which earning yield is randomly determined. Parameter estimations are made through the use of least-square technique, while the outcomes are deduced from the Euler–Maruyama method. We use numerical simulation to determine the effectiveness of the models, comparing our newly proposed model with the previous models. The actual dividend yield data is applied for comparison. The results show that our model performs best among the three models being compared.

Keywords

• Dividend yield
• Earning yield
• Stochastic process
• Compound Ornstein–Uhlenbeck process