On the timing and pricing of dividends

J.H. van Binsbergen, M. Brandt, R.S.J. Koijen

Research output: Contribution to journalArticleScientificpeer-review

89 Citations (Scopus)

Abstract

We present evidence on the term structure of the equity premium. We recover prices of dividend strips, which are short-term assets that pay dividends on the stock index every period up to period T and nothing thereafter. It is short-term relative to the index because the index pays dividends in perpetuity. We find that expected returns, Sharpe ratios, and volatilities on short-term assets are higher than on the index, while their CAPM betas are below one. Short-term assets are more volatile than their realizations, leading to excess volatility and return predictability. Our findings are inconsistent with many leading theories.
Original languageEnglish
Pages (from-to)1596-1618
JournalAmerican Economic Review
Volume102
Issue number4
Publication statusPublished - 2012

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