Equity yields

E. Vrugt, J.H. van Binsbergen, R.S.J. Koijen, W. Hueskes

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We study a new data set of dividend futures with maturities up to ten years across three world regions: the US, Europe, and Japan. We use these asset prices to construct equity yields, analogous to bond yields. We decompose the equity yields to obtain a term structure of expected dividend growth rates and a term structure of risk premia, which decomposes the equity risk premium by maturity. We find that the slope of the term structure of risk premia is pro-cyclical, whereas the slope of the term structure of expected dividend growth rates is counter-cyclical. The comovement of yields across regions is, on average, higher for long-maturity yields than for short-maturity yields, whereas the variation in this comovement is much higher for short-maturity yields
Original languageEnglish
Pages (from-to)503-519
JournalJournal of Financial Economics
Volume110
Issue number3
DOIs
Publication statusPublished - 2013

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Equity
Maturity
Term structure
Dividends
Comovement
Risk premia
Bond yields
Asset prices
Equity risk premium
Japan

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Vrugt, E. ; van Binsbergen, J.H. ; Koijen, R.S.J. ; Hueskes, W. / Equity yields. In: Journal of Financial Economics. 2013 ; Vol. 110, No. 3. pp. 503-519.
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Vrugt, E, van Binsbergen, JH, Koijen, RSJ & Hueskes, W 2013, 'Equity yields', Journal of Financial Economics, vol. 110, no. 3, pp. 503-519. https://doi.org/10.1016/j.jfineco.2013.08.017

Equity yields. / Vrugt, E.; van Binsbergen, J.H.; Koijen, R.S.J.; Hueskes, W.

In: Journal of Financial Economics, Vol. 110, No. 3, 2013, p. 503-519.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Vrugt, E.

AU - van Binsbergen, J.H.

AU - Koijen, R.S.J.

AU - Hueskes, W.

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AB - We study a new data set of dividend futures with maturities up to ten years across three world regions: the US, Europe, and Japan. We use these asset prices to construct equity yields, analogous to bond yields. We decompose the equity yields to obtain a term structure of expected dividend growth rates and a term structure of risk premia, which decomposes the equity risk premium by maturity. We find that the slope of the term structure of risk premia is pro-cyclical, whereas the slope of the term structure of expected dividend growth rates is counter-cyclical. The comovement of yields across regions is, on average, higher for long-maturity yields than for short-maturity yields, whereas the variation in this comovement is much higher for short-maturity yields

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