Duration-Based Stock Valuation: Reassessing Stock Market Performance and Volatility

Jules van Binsbergen

No 27367, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a panel of international government bond data, I construct fixed income portfolios that match the duration of the dividend strips of the corresponding local aggregate stock market index. I find that these bond portfolios have performed as well as -- if not better than -- their stock counterparts in the past half century while exhibiting similar (or even higher) levels of volatility. These results provide a novel perspective on both the equity risk premium and excess volatility puzzles (bubbles). I present several potential explanations, and discuss further the implications for macroeconomics, monetary economics, asset pricing, and corporate finance.

JEL-codes: E2 E21 E4 G1 G11 G12 G15 G31 G32 G5 G52 O4 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-fmk and nep-mac
Note: AP CF EFG ME
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Citations: View citations in EconPapers (10)

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