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American Economic Review Vol. 102 No. 4 2012

On the Timing and Pricing of Dividends

Jules van Binsbergen1; Michael Brandt2; Ralph Koijen3

1 Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60201, Stanford GSB, and NBER. · 2 Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27707, and NBER. · 3 Booth School of Business, University of Chicago, 5807 South Woodlawn Avenue., Chicago, IL 60637, Netspar (Tilburg University), and NBER.

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.

DOI
10.1257/aer.102.4.1596
Volume
102
Issue
4
Pages
1596-1618
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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