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On the Timing and Pricing of Dividends

Jules van Binsbergen (), Michael W. Brandt and Ralph Koijen
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Michael W. Brandt: Duke University and NBER

No 11-13, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We recover prices of dividend strips on the aggregate stock market using data from derivatives markets. The price of a k-year dividend strip is the present value of the dividend paid in k years. The value of the stock market is the sum of all dividend strip prices across maturities. We study the properties of strips and find that expected returns, Sharpe ratios, and volatilities on short-term strips are higher than on the aggregate stock market, while their CAPM betas are well below one. Short-term strip prices are more volatile than their realizations, leading to excess volatility and return predictability.

Keywords: Equity Risk Premium; Dividend Strips; Consumption-Based Asset Pricing (search for similar items in EconPapers)
Pages: 50 pages
Date: 2011-01
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Related works:
Journal Article: On the Timing and Pricing of Dividends (2012) Downloads
Working Paper: On the Timing and Pricing of Dividends (2010) Downloads
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