DO DIVIDEND YIELDS EXPLAIN STOCK PRICE CHANGES? AN ANALYSIS OF BALTIC SEA MARKETS

Abstract

Despite the integration of the Lithuanian, Latvian, and Estonian stock markets into the NASDAQ OMX Baltic exchange, the region continues to attract limited investment compared to its Nordic counterparts. This study tries to find - do dividend yields explain long-term stock price changes in the Baltic stock market. A dataset of 34 listed Baltic companies from Lithuania, Latvia, and Estonia was analyzed for the period 2016–2025, and the results were compared to 245 large-cap companies listed in Finland, Sweden, Denmark, and Iceland. Ten-year stock price change was correlated with ten-year dividend yield, profit change, and revenue change. The Baltic markets exhibit a statistically significant and semi-strong positive correlation between dividend yield and long-term stock price change, indicating that investors in this emerging region price dividends as a relevant component of expected return. Profit change also showed a positive correlation, while revenue change was weaker. Cross-market comparison confirms the robustness of the relationship: Denmark shows the strongest correlation (r = 0.78; p < 10⁻¹⁰), Finland and Sweden moderate but significant correlations, and Iceland no statistically reliable relationship due to the small market. The results suggest that dividend yield functions as a meaningful driver of long-term price appreciation in the Baltic region and aligns more closely with Nordic investor behaviors than prior literature on emerging markets would imply. Findings contribute evidence that dividend policy may serve as a valuation signal in developing equity markets