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On the Timing and Pricing of Dividends

Jules van Binsbergen (), Michael Brandt and Ralph Koijen

American Economic Review, 2012, vol. 102, issue 4, 1596-1618

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.

Date: 2012
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Working Paper: On the Timing and Pricing of Dividends (2011) Downloads
Working Paper: On the Timing and Pricing of Dividends (2010) Downloads
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