We present a new dividend-adjusted blue chip index for the Danish stock market covering the period 1985-2002. In contrast to other indices on the Danish stock market, the index is calculated on a daily basis. In the first part of the paper a detailed description of the construction of the index is given. In the second part of the paper we analyze the time-series properties of daily, weekly, and monthly returns, and we present evidence on predictability of multi-period returns. We also compare stock returns with the returns on long-term bonds and short-term money market instruments (that is, the equity risk premium), and we compute the Hansen-Jagannathan bound to infer the properties of the underlying stochastic discount factor generating Danish asset returns.
Research in International Business and Finance, 2005, Vol 19, Issue 1, p. 53-70
Asset market returns; Mean-reversion and predictability; Hansen-Jagannathan bound