On the timing and pricing of dividends

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

Research output: Contribution to journalArticleScientificpeer-review

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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Assets
Dividends
Pricing
Sharpe ratio
Capital asset pricing model
Equity premium
Return predictability
Excess volatility
Excess returns
Term structure
Stock index
Expected returns

Cite this

van Binsbergen, J. H., Brandt, M., & Koijen, R. S. J. (2012). On the timing and pricing of dividends. American Economic Review, 102(4), 1596-1618.
van Binsbergen, J.H. ; Brandt, M. ; Koijen, R.S.J. / On the timing and pricing of dividends. In: American Economic Review. 2012 ; Vol. 102, No. 4. pp. 1596-1618.
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van Binsbergen, JH, Brandt, M & Koijen, RSJ 2012, 'On the timing and pricing of dividends', American Economic Review, vol. 102, no. 4, pp. 1596-1618.

On the timing and pricing of dividends. / van Binsbergen, J.H.; Brandt, M.; Koijen, R.S.J.

In: American Economic Review, Vol. 102, No. 4, 2012, p. 1596-1618.

Research output: Contribution to journalArticleScientificpeer-review

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AU - van Binsbergen, J.H.

AU - Brandt, M.

AU - Koijen, R.S.J.

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AB - 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.

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EP - 1618

JO - The American Economic Review

JF - The American Economic Review

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