Title: Long run risks & price/dividend ratio factors
Description: "We show that long run consumption risk models imply that the covariance matrix of the logarithm of price to dividend (P/D) ratios of stocks has a strict factor structure.  Factor analysis of the P/D ratios of 25 portfolios formed by sorting stocks based on their size and book to market ratio during the 1943 to 2008 reveals two significant factors.  Consistent with theory, these factors predict growth in US aggregate consumption & dividends and consumption growth volatility, and explain the cross section of average excess returns on portfolios based on size, book/market, long term reversal, short term reversal, and earnings to price ratios"--National Bureau of Economic Research web site.