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Equity Yields

Jules van Binsbergen (), Wouter Hueskes, Ralph Koijen and Evert B. Vrugt

No 17416, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study a new data set of prices of traded dividends with maturities up to 10 years across three world regions: the US, Europe, and Japan. We use these asset prices to construct equity yields, analogous to bond yields. We decompose these yields to obtain a term structure of expected dividend growth rates and a term structure of risk premia, which allows us to decompose the equity risk premium by maturity. We find that both expected dividend growth rates and risk premia exhibit substantial variation over time, particularly for short maturities. In addition to predicting dividend growth, equity yields help predict other measures of economic growth such as consumption growth. We relate the dynamics of growth expectations to recent events such as the financial crisis and the earthquake in Japan.

JEL-codes: E32 E43 E44 F01 G10 G12 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-mac
Note: AP CF EFG
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Published as van Binsbergen, Jules & Hueskes, Wouter & Koijen, Ralph & Vrugt, Evert, 2013. "Equity yields," Journal of Financial Economics, Elsevier, vol. 110(3), pages 503-519.

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