Examination of Stock Market "Temperature" Using Price-Dividend Dependence for European Sharest

The paper aims to investigate some European stock markets (whether they are overheated or undervalued) on the basis of price-dividend dependence analysis for a number of liquid shares. Our approach applies the procedure of revealing of shareholders' expectations through econometric analysis of share price movement compared to changes in the dividend payments. As a result one may comprehend whether speculative motive of shareholders is responsible for market evaluating of the share or, on the contrary, shareholders are predominantly attracted by dividend payments on it. In such a way analysis of changes in price-dividend dependence for representative group of assets makes it possible to monitor when stock market overheats and generates a bubble. Moreover, the model developed permits to investigate how the company's industry is related to predominant motive of the representative shareholder when investors' expectations are substantially heterogeneous.