Dividend Dynamics and the Term Structure of Dividend Strips

Frederico Belo, Pierre Collin-Dufresne and Robert S. Goldstein

Journal of Finance, 2015, vol. 70, issue 3, 1115-1160

Abstract: type="main">

Many leading asset pricing models are specified so that the term structure of dividend volatility is either flat or upward sloping. These models predict that the term structures of expected returns and volatilities on dividend strips (i.e., claims to dividends paid over a prespecified interval) are also upward sloping. However, the empirical evidence suggests otherwise. This discrepancy can be reconciled if these models replace their proposed dividend dynamics with processes that generate stationary leverage ratios. Under such policies, shareholders are forced to divest (invest) when leverage is low (high), which shifts risk from long- to short-horizon dividend strips.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (64)

Downloads: (external link)
http://hdl.handle.net/10.1111/jofi.12242 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:70:y:2015:i:3:p:1115-1160

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().