Dividend Yield and Return Predictability in Sweden Evidence Across Market Uncertainty Regimes

Abstract

This thesis examines whether dividend yield predicts future Swedish stock market returns and whether this relationship varies across market uncertainty regimes. Using monthly data from 2004 to 2025, the study applies simple Fama-French inspired predictive regressions which are also extended with uncertainty regimes based on VSTOXX percentiles. The simple baseline results provide no evidence of full-sample dividend-yield predictability. However, the uncertainty-regime results suggest that the dividend-yield-return relationship changes across uncertainty regimes, with partial support for the idea that dividend yield becomes more aligned with risk-premium logic during elevated uncertainty.