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Equity yields

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  • van Binsbergen, Jules
  • Hueskes, Wouter
  • Koijen, Ralph
  • Vrugt, Evert

Abstract

We study a new data set of dividend futures with maturities up to ten 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 the equity yields to obtain a term structure of expected dividend growth rates and a term structure of risk premia, which decomposes the equity risk premium by maturity. We find that the slope of the term structure of risk premia is pro-cyclical, whereas the slope of the term structure of expected dividend growth rates is counter-cyclical. The comovement of yields across regions is, on average, higher for long-maturity yields than for short-maturity yields, whereas the variation in this comovement is much higher for short-maturity yields.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 110 (2013)
Issue (Month): 3 ()
Pages: 503-519

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Handle: RePEc:eee:jfinec:v:110:y:2013:i:3:p:503-519

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Web page: http://www.elsevier.com/locate/inca/505576

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Cited by:
  1. Jäckel, Christoph, 2013. "Model uncertainty and expected return proxies," MPRA Paper 51978, University Library of Munich, Germany.
  2. Ralph S.J. Koijen & Tobias J. Moskowitz & Lasse Heje Pedersen & Evert B. Vrugt, 2013. "Carry," NBER Working Papers 19325, National Bureau of Economic Research, Inc.

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