Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?

An ex-post rational real common stock price series, formed as the present value of subpequent detrended real diY~dend~, ~~~ound to be a very stable and smooth series when compared with the actual detrended real stock price series. An efficient markets model which makes price the optimal forecast of the ex-post rational price is inconsistent with this data if the long-run trend of real dividends is assumed given. To reconcile the data with the efficient markets model, one must assume that the market expected real dividends deviate from their long-run trend much more than they did historically.